Report: Block Bits Founder Guilty After $960K Crypto Bot Pitch Implodes

A federal jury convicted Block Bits co-founder Japheth Dillman on five fraud-related counts after prosecutors showed how nearly $1 million flowed from investors into a cryptocurrency trading operation built around an automated system that never existed.

That machine was the heart of the pitch, and prosecutors said it simply was not there. The SEC alleged Block Bits’ actual trading amounted to Mata manually placing trades through an exchange account. Yet Dillman told investors in June and July 2017 that the automated operation was already producing profits.

By 2022, the criminal complaint pegged investor losses at roughly $508,000. Prosecutors’ case boiled down to the money trail: investors opened their wallets because they believed Dillman’s claims about technology that supposedly traded their capital and arrangements that supposedly protected it.

Mata became one of the government’s most important witnesses against his former partner. He pleaded guilty to one wire fraud count in June 2022, then took the stand against Dillman under a plea agreement while waiting for his own sentencing, according to Law360.

Dillman’s defense went straight after Mata’s credibility. Attorney Richard A. Tamor branded him a “stone-cold liar” and argued Dillman relied on what his technical partner told him about the trading operation. The defense cast Dillman as the money-and-investor guy while Mata handled the machinery behind the curtain.

The jury wasn’t buying it and convicted Dillman on all five counts.

Now the numbers get considerably uglier for Dillman. Each wire fraud count carries a statutory maximum of 20 years behind bars and a $250,000 fine, although the actual punishment will hinge on federal sentencing rules and calculations such as investor losses. No sentencing date has been set.

Dillman now heads into sentencing, with restitution and forfeiture still hanging over the case. Mata remains in line for his own sentence, while the SEC’s unfinished civil action ensures Block Bits’ legal reckoning isn’t finished with Monday’s guilty verdict.