A federal jury has convicted Japheth Dillman, the founder of cryptocurrency trading fund Block Bits Capital, after prosecutors said he misled investors about a proprietary automated trading system and how their money was being used.

According to the U.S. Attorney’s Office for the Northern District of California, Dillman raised nearly $1 million from more than 20 investors between June 2017 and August 2018 by claiming the fund had a functioning “Autotrader” for automated crypto trading. Prosecutors said the software was not working as represented.

Conviction after 10-day trial

Dillman, 48, of San Francisco, was found guilty following a 10-day trial in federal court. The jury convicted him on two counts: wire fraud and conspiracy to commit wire fraud.

The case centered on statements made to investors about Block Bits Capital’s trading operation. Prosecutors alleged that those representations were false and were used to bring investor money into the fund.

How prosecutors said the scheme worked

Federal prosecutors said Dillman promoted Block Bits Capital as a crypto trading fund powered by a proprietary autotrading system capable of executing automated trades. The government’s case said that claim was untrue and that the supposed trading technology was not functioning as described.

The U.S. Attorney’s Office said the fundraising took place from June 2017 through August 2018 and involved more than 20 investors. In total, the government said nearly $1 million was collected during that period.

Use of investor funds and reported losses

Evidence presented at trial showed that investor money was not used for the automated trading operation investors had been told about, according to prosecutors. Instead, the funds were used to pay Dillman and others, and to back speculative investments in other crypto ventures.

Those bets resulted in major losses, the government said. Prosecutors also told the jury that Dillman falsely claimed Block Bits had generated significant trading profits, when the trading activity had actually produced additional losses.

Potential penalties and next court date

Wire fraud and conspiracy to commit wire fraud each carry a maximum penalty of 20 years in prison and a fine of up to $250,000. Any final sentence will be determined by the court.

Sentencing is scheduled for December 8, 2026, at 9:30 a.m. before Judge Seeborg. That hearing is the next confirmed step in the case.

Source: dailyhodl.com