On 25 August, the United States Department of Justice stated that the San Francisco Federal Jury had found the founder of the Encrypted Trading Fund Block Bits Capital, Japheth Dillman, guilty of telecommunications fraud and conspiracy. According to the prosecution, he raised funds from investors under an automated trading system that was not really operational and continued to misrepresent his performance after the loss of the fund.
Fund-raising in the name of automatic transactions
According to the trial, Dillman raised nearly $1 million from more than 20 investors between June 2017 and August 2018. He stated at the time that the Fund would rely on the proprietary tool known as Autotrade for automated encryption transactions and that the system was complete and operational.
The prosecution notes, however, that the algorithm does not actually work properly and that Dillman was aware of it. This means that investors ' funds cannot be traded in the manner they promised from the outset.
The money was diverted.
According to the United States Department of Justice, Dillman and an accomplice did not manage the funds as promised, but instead paid themselves part of the funds, while the remainder went to other high-risk encryption projects. At the same time, they describe to investors more robust financial arrangements.
These speculative bets were followed by significant losses. The prosecution also stated that after the loss was increased, Dillman continued to indicate to investors that the Block Bits transaction had yielded significant gains, whereas the fact was that the loss had increased further.
- Size of fund-raising: close to $1 million
- Number of investors: over 20
- Period involved: June 2017 to August 2018
December sentencing
The case was completed for 10 days under the chairmanship of Richard Seeborg, United States District Judge. Dillman is still on bail awaiting sentencing, with a date set for 8 December.
According to the United States Department of Justice, he could face up to 20 years ' imprisonment and a $250,000 fine on each charge, with the final sentence to be determined by the judge in accordance with the federal sentencing guidelines.
The investigation of the case was conducted by the FBI and the Criminal Investigation Department of the United States Internal Revenue Service, assisted by the San Francisco Office of the United States SEC, and the prosecution was facilitated by the United States Assistant Prosecutor.
Additional information:The Federal Bureau of Investigation (FBI) of the United States previously disclosed that more than half of the fraud and cybercrime losses reported by the United States public in 2025 related to encrypted assets. Of this amount, investment-type fraud losses amounted to $8.6 billion, an increase of 32 per cent over 2024.