A federal jury convicted Japheth Dillman of wire fraud for a fake crypto bot scheme that raised $960,000 from investors. Losses hit $508,000. Sentencing pending.
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A federal jury in California has convicted Japheth Dillman of wire fraud and conspiracy to commit wire fraud for his role in operating Block Bits Fund I, LP, a crypto trading fund that raised roughly $960,000 from more than 20 investors. The pitch centered on a proprietary autotrading bot that was supposed to exploit price differences across digital asset exchanges. The bot never worked.
Dillman faces a maximum of 20 years per count. Sentencing has not been set.
The fund operated between mid-2017 and mid-2018, marketing itself as a vehicle for automated arbitrage. Trial evidence showed the bot was never operational. Instead of deploying capital into the promised algorithmic strategy, Dillman and co-founder David Mata funneled the money into loans and the AML Bitcoin initial coin offering, investments the fund's limited partners never authorized.
Of the roughly $960,000 raised, investors lost an estimated $508,000.
Mata pleaded guilty to one count of wire fraud in June 2022 under a cooperation agreement with federal prosecutors. He later testified against Dillman at trial. Mata also settled SEC civil charges, agreeing to disgorge $75,000 plus interest and accepting a bar from the financial industry.
The FBI and IRS Criminal Investigation unit handled the case after investor complaints triggered federal attention.
The AML Bitcoin ICO, where some misappropriated funds ended up, marketed itself as a privacy-focused cryptocurrency with anti-money laundering features. Moving investor money into an unrelated token sale without disclosure formed the core of the fraud case, prosecutors argued.
Dillman remains free pending sentencing. The court has not set a date.
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