A federal jury on Monday, Aug. 24, convicted Japheth Dillman, co-founder of crypto trading fund Block Bits Capital, of wire fraud and conspiracy to commit wire fraud after prosecutors said he deceived more than 20 investors out of nearly $1 million.
- From 2017 to 2018, Block Bits told investors it had developed a working automated trading system called the "Autotrader" that could profit from crypto arbitrage.
- But prosecutors said the software didn't work and investor funds couldn't be traded as promised.
- Some of that money ended up somewhere else entirely.
SEC filings show that Dillman and Block Bits co-founder David Mata used about $101,000 of investor funds to invest in the AML Bitcoin initial coin offering, despite telling investors that part of the fund's assets were being kept in supposedly low-risk "cold storage" arrangements.
AML Bitcoin was marketed by founder Rowland Marcus Andrade as a crypto with anti-money-laundering technology and other features.
Investor money flowed into another fraud case
But years later, in March 2025, a separate federal jury convicted Andrade of wire fraud and money laundering after prosecutors said he raised millions through false claims about the token's technology and purported business deals.
Andrade was sentenced four months later to seven years in federal prison.
There's no indication that Dillman knew at the time that Andrade would later be convicted or that Block Bits' investment itself formed part of Andrade's criminal case.
But the connection means money from one crypto operation now proven fraudulent in court had been routed into another crypto project whose founder would later be convicted of fraud.
In the Block Bits case, prosecutors said Dillman and his associates also used investor money to pay themselves and make other risky crypto investments while falsely reporting profits to clients.
Dillman is scheduled to be sentenced on Dec. 8 and faces a statutory maximum of 20 years in prison on each count.