TL;DR:
- A federal jury in San Francisco convicted Japheth Dillman on four counts of wire fraud and one count of conspiracy.
- The firm raised approximately $960,000 from 22 investors between June 2017 and August 2018 under the promise of a non-existent automated bot.
- Direct investor losses amount to roughly $508,000, according to criminal complaint filings and SEC records.
This Monday, a federal jury in the U.S. District Court for the Northern District of California found Block Bits founder Japheth Dillman guilty, following confirmation of a fraudulent scheme involving approximately $960,000 from retail investors.
🚨 Japheth Dillman, founder of Block Bits (the crypto “autotrader” fund charged in 2022 that raised nearly $1M), has been found GUILTY on every single count.
Conspiracy + four counts of wire fraud.
Unanimous. Dated today. https://t.co/IZqYux9orw pic.twitter.com/dpJ5nQSq4w
— Ariel Givner (@GivnerAriel) August 24, 2026
Law360 reported from the San Francisco courthouse that deliberations by the 12-member jury took around six hours across two court days. Federal prosecutors proved that funds raised between June 2017 and August 2018 were directed into a non-existent arbitrage system.
Dillman and his partner, David Mata, promoted the investment vehicle Block Bits Fund I, claiming they had proprietary software capable of trading 100 digital assets across more than 30 exchange platforms. Prosecutors determined that the bot was never developed or deployed.
Filings presented by the U.S. Securities and Exchange Commission (SEC) revealed that the actual trading consisted of manual orders placed by Mata on a single exchange account. Despite the absence of any automated software, Dillman reported positive monthly returns to clients for June and July 2017.
The scheme also involved false claims regarding asset custody. The promoters told investors that roughly 40% of the capital was secured in low-risk cold storage; however, judicial investigations confirmed the money was diverted to unsecured loans and the AML Bitcoin initial coin offering (ICO).
Co-conspirator Testimony and Legal Proceedings
David Mata cooperated with prosecutors after pleading guilty to one count of wire fraud in June 2022. During the trial, Mata testified against Dillman, detailing the firm’s internal operations.
Dillman’s defense counsel attempted to dismiss the former partner’s testimony as false, arguing that his client was unaware of the software’s technical inner workings. Defense attorneys framed Dillman as strictly the capital fundraiser and Mata as solely responsible for software development.
The jury rejected these arguments, returning a guilty verdict on all five federal counts charged.
The federal statutory framework sets a maximum sentence of up to 20 years in prison and fines of up to $250,000 for each wire fraud count. The final sentence will depend on the definitive loss calculation and the court’s application of federal sentencing guidelines.
The parallel civil enforcement action brought by the SEC against Dillman and Block Bits entities remains active. The financial regulator continues to seek disgorgement of profits, civil monetary penalties, and officer-and-director bars, while the court awaits scheduling the formal sentencing hearing.
