A federal jury in San Francisco has convicted Japheth Dillman, 48, the founder of cryptocurrency trading fund Block Bits Capital, of wire fraud and conspiracy after a 10-day trial. Prosecutors demonstrated that Dillman sold investors on automated trading software he knew was not functional, the Justice Department announced Monday.
The Scheme
Between June 2017 and August 2018, Dillman raised close to $1 million from more than 20 investors. He told them Block Bits Capital would generate returns through automated cryptocurrency trading powered by a proprietary tool called the ‘Autotrader,’ which he claimed was complete and operational.
In reality, prosecutors said, the algorithm did not function. Because the software could not do what Dillman promised, investor money could not be deployed as represented. Dillman and an unnamed co-conspirator instead used the funds to pay themselves and to make speculative bets on other crypto ventures, while telling investors their money was held in something safer.
Those speculative positions lost heavily. Rather than disclose the losses, Dillman told investors that Block Bits’ trading had produced significant profits, compounding the deception.
Investigation and Charges
The FBI and IRS Criminal Investigation led the investigation, with assistance from the SEC’s San Francisco office. Assistant U.S. Attorneys Christiaan Highsmith and Charles Bisesto handled the prosecution.
Dillman was convicted before U.S. District Judge Richard Seeborg and remains free on bond pending sentencing, which is scheduled for December 8. He faces up to 20 years in prison and a $250,000 fine on each count, with the final term to be set by the judge under federal sentencing guidelines.
The timeline is worth noting. The last of the money was raised in August 2018, and the verdict arrived this week, eight years later.
Broader Context
The case is one of a growing number of criminal actions targeting fraudulent investment schemes in the cryptocurrency sector. According to the FBI’s complaint center, crypto accounted for more than half of everything Americans reported losing to scams and cybercrime in 2025. Investment schemes were the single largest component, totalling $8.6 billion, a rise of 32% on 2024.
The Consumer Federation of America has argued the true cost is several times higher, on the basis that the overwhelming majority of people who are defrauded never file a complaint with law enforcement.
