A San Francisco man and his partner at a cryptocurrency trading firm are facing federal charges for allegedly defrauding investors.
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Federal prosecutors charged Japheth Dillman, 44, and David Mata, a 42-year-old Spokane, Wash. resident, with one count of wire fraud earlier this week, the U.S. Attorney's Office for the Northern District of California announced on Wednesday.
If convicted, Dillman and Mata could serve up to 20 years in prison and three years under supervised release. They could also pay a maximum fine of $250,000.
While serving as a general partner at Block Bits Fund between July 2017 and June 2018, Dillman allegedly told potential investors that the fund was developing a proprietary autotrader that would turn a profit by exploiting the differences between cryptocurrencies sold on a number of exchanges. He falsely claimed the technology was working and profitable.
According to a criminal complaint, Dillman and Mata raised about $960,000 from investors by misrepresenting the company's technology and telling them their money would be used to develop and run the autotrader. Prosecutors alleged that Block Bits Fund's autotrader never worked.
Dillman and Mata allegedly told investors that their funds would be placed in "cold storage," or an offline wallet that is considered less risky. Instead, prosecutors said the pair used the funds to "invest in risky, cryptocurrency-related ventures." The duo allegedly sent reports to investors claiming their funds were stored securely, even though officials said “the funds were invested in risky ventures.”
Prosecutors alleged that all of those investments failed. Block Bits investors lost $508,000 in all, according to the complaint.
Dillman was scheduled to appear in court on Thursday, while Mata is due to appear on Friday. U.S. Magistrate Judge Thomas Hixson is overseeing both cases.
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