San Francisco gaming founder convicted of wire fraud in crypto trading fund scam

Gaming industry veteran convicted in crypto fraud case

A federal jury in the U.S. has convicted Japheth Dillman, a 48-year-old founder from San Francisco, of wire fraud and conspiracy to commit wire fraud. Dillman was involved in a fraudulent crypto trading fund called Block Bits Capital.

The Department of Justice (DOJ) announced the conviction on Monday. Dillman and a co-conspirator are accused of misleading over 20 investors, taking nearly $1 million through false statements about the fund.

How the fraud worked

Between June 2017 and August 2018, Dillman and his co-conspirator told investors that Block Bits Capital used an automated trading tool called "Autotrader." They claimed this tool was developed by the fund and could generate profits. However, Dillman knew the tool did not work.

Instead of using investor money for trading, the funds were used to pay themselves and make risky investments in other crypto projects. These investments led to significant losses. Dillman hid these losses from investors and falsely claimed the fund was profitable.

Key details of the case

• Dillman faces up to 20 years in prison and a $250,000 fine for each count of conviction.
• The fraud involved nearly $1 million from more than 20 investors.
• Dillman has a background in the gaming industry, co-founding the game accelerator YetiZen in 2010.
• His sentencing is scheduled for December 8.

What the DOJ statement says

The DOJ stated that Dillman and his co-conspirator made false claims about the fund’s capabilities and profitability. They misled investors about the use of an automated trading algorithm and hid the true nature of the fund’s investments and losses.

What is confirmed

• Japheth Dillman was convicted of wire fraud and conspiracy to commit wire fraud.
• The fraud involved nearly $1 million from investors.
• Dillman and a co-conspirator misled investors about the fund’s trading tool and profitability.
• Investor funds were used for personal payments and risky investments.
• Dillman is scheduled for sentencing on December 8.

What is still unclear

• The identity of the co-conspirator has not been disclosed in the available information.
• It is unclear if any of the lost investor funds can be recovered.

Why this matters for crypto investors

This case highlights the risks of investing in crypto funds without thorough research. Investors should verify claims about trading tools, profitability, and fund management before committing money. The conviction also shows that authorities are actively pursuing fraud in the crypto space.

Sources

• The Block
• U.S. Department of Justice