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Block Bits Capital Founder Found Guilty in $1 Million Crypto Fraud Case

Block Bits Capital Founder Found Guilty in $1 Million Crypto Fraud Case

Japheth Dillman was convicted after prosecutors said investors were misled about an automated crypto trading system.

Written by Rahul Dhingra, Edited by Rohan Pal | Updated: 25 August 2026 18:26 IST

Block Bits Capital Founder Found Guilty in $1 Million Crypto Fraud Case

Photo Credit: Unsplash/Sasun Bughdaryan

Japheth Dillman remains out on bond ahead of his December sentencing hearing

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Highlights

Dillman faces up to 20 years in federal prison per conviction
The case involved an automated system called “Autotrader”
FBI and IRS Criminal Investigation worked on the case

Block Bits Capital co-founder Japheth Dillman was found guilty of wire fraud and conspiracy by a federal jury after allegations of fraud involving over 20 investors losing almost $1 million (roughly Rs. 9.5 crore) in a cryptocurrency trading fund. According to the US Department of Justice, Dillman was convicted after a 10-day trial before US District Judge Richard Seeborg in the Northern District of California. Dillman continues to remain out on bond and will have his sentencing hearing on December 8.

Prosecutors Said Investors' Money Was Put Into High-Risk Crypto Projects

The court documents indicated that Dillman assisted in raising funds for Block Bits Capital from June 2017 to August 2018 by misleading the investors about the technical trading software of the company. The prosecutors further claimed that Dillman, together with a co-conspirator, marketed an automated cryptocurrency trading system known as the “Autotrader,” as a completed product. The program was meant to earn returns by trading digital assets automatically. However, Dillman knew the program did not do what he said it did at the time, as per the evidence provided in court. Therefore, money from the investors could not be used for automatic trading of the digital assets.

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While trying to obtain funds, Dillman and his associates advertised Block Bits Capital as a fund that would make money by using automated trading of cryptocurrencies, the Justice Department reported. The prosecutors noted that these statements were made despite Dillman's awareness that the Autotrader was not working. In addition to this, the prosecutors mentioned before the jury that the money of the investors was not used only for the scheme that had been pitched by the company. Dillman and his co-conspirator pocketed the money and invested it in high-risk cryptocurrency projects, without disclosing the said risks to investors.

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In light of the jury's verdict, Dillman faces a maximum of 20 years of incarceration in federal prison and a fine of up to $250,000 (roughly Rs. 2.3 crore) per conviction under the federal statute, states the Justice Department. Charges include wire fraud as per 18 U.S.C. § 1343 and conspiracy to commit wire fraud as per 18 U.S.C. § 1349. Agencies that participated in the case were the FBI and IRS Criminal Investigation, along with the SEC's San Francisco Regional Office.

Last year, another founder, Alex Mashinsky, the former chief executive of bankruptcy cryptocurrency lender Celsius Network, was sentenced to 12 years in prison after pleading guilty to securities fraud and commodities fraud. Federal prosecutors said Mashinsky, 59, misled customers about Celsius' safety and artificially inflated the value of Celsius' proprietary token Cel. He sought a prison term of at least 20 years, calling it "just punishment" for having victimised thousands of people and caused billions of dollars in losses.

Cryptocurrency is an unregulated digital currency, not a legal tender and subject to market risks. The information provided in the article is not intended to be and does not constitute financial advice, trading advice or any other advice or recommendation of any sort offered or endorsed by NDTV. NDTV shall not be responsible for any loss arising from any investment based on any perceived recommendation, forecast or any other information contained in the article.

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Further reading: Crypto Scams, Crypto Frauds, Security

Rahul Dhingra

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Rahul Dhingra is a crypto writer at Gadgets 360, where he covers the exciting world of Cryptocurrency, Blockchain, Defi and Web3. Before joining Gadgets 360, he worked as a content specialist for a European-based Crypto Exchange. Rahul loves storytelling, not just through the written word but also through the visual medium. Beyond his professional life, Rahul is a sports fanatic. Whether it’s cricket or football, his passion for the game is contagious. More