Block Bits Co‑founder Convicted of Fraud After $960K Fund Collapse

A 12‑member federal jury in the Northern District of California found Block Bits co‑founder Japheth Dillman guilty of four wire‑fraud counts and one conspiracy count. The verdict followed a six‑hour deliberation over two days.

How the Scheme Operated

Between June 2017 and August 2018, Dillman and co‑founder David Mata raised about $960,000 from roughly 22 retail investors. The pitch promised that “Block Bits Fund I” used a proprietary trading bot to arbitrage across more than 30 exchanges, handling about 100 digital assets. Prosecutors said the bot never existed; trading was performed manually by Mata.

Investors were also told that roughly 40 % of fund assets were held in low‑risk “cold storage” while generating high returns. The SEC alleged those arrangements were fictitious, with capital instead placed in risky loans and an AML Bitcoin ICO.

Legal Outcomes

Dillman faces up to 20 years in prison per wire‑fraud count and potential fines of $250,000 per count, subject to federal sentencing guidelines. No sentencing date has been set.

The Securities and Exchange Commission’s civil case against Dillman and Block Bits remains active, seeking injunctions, disgorgement, penalties, and bans on future securities offerings.

Co‑founder Testimony

David Mata, who pleaded guilty to a wire‑fraud count in June 2022, testified against Dillman under a plea agreement. Dillman’s defense argued he relied on Mata’s technical expertise, but the jury rejected that argument.