San Francisco Cryptocurrency Fund Partners Charged with Fraud
Two former partners of a San Francisco-based cryptocurrency trading fund are facing charges of fraud after allegedly deceiving investors about the fund’s capabilities and investment strategies.
Accusations Against Japheth Dillman and David Mata
Japheth Dillman, a resident of San Francisco, and David Mata, from Spokane, Washington, were general partners at Block Bits Fund I, LP, where they are accused of misleading approximately 22 investors and obtaining $960K through fraudulent means between June 2017 and July 2018.
Dillman, who is also the founder of Block Bits Capital, LLC, and Block Bits Capital GP I, LLC, allegedly claimed that the fund had developed an innovative autotrading bot. He purported that the technology was generating significant profits by executing cryptocurrency arbitrage trades across different exchanges, exploiting price differentials.
Investors were led to believe that their funds would be used to operate and enhance the autotrader technology. However, a complaint filed in the Northern District of California revealed that the fund never actually had a working autotrader.
Misrepresentation of Investment Practices
Dillman allegedly assured investors that 40% of the funds were securely stored in ‘cold storage,’ promising substantial returns without exposure to risky investments. However, the complaint alleges that the funds were not placed in cold storage as claimed but were instead invested in high-risk cryptocurrency ventures unrelated to the fund’s stated objectives.
Both Dillman and Mata allegedly sent false updates and profit reports to investors, falsely representing that their funds were secure when they were actually invested in failed ventures, resulting in losses of approximately $508K.
Legal Action and Consequences
Dillman has been arrested and charged with wire fraud, while Mata faces a separate wire fraud charge. The Securities and Exchange Commission (SEC) has also taken action against both individuals, seeking injunctions, disgorgement of ill-gotten gains, civil monetary penalties, and other appropriate relief.
The case serves as a reminder of the importance of due diligence and transparency in the cryptocurrency investment space, highlighting the risks associated with fraudulent schemes and misrepresentations.