A pair of blockchain founder types claimed their crypto bot was producing “jaw dropping,” “eye-popping,” and “insane” profits. An SEC charging document says they “fabricated the performance results.”
Another reason to be skeptical of anyone trying to sell you on some cryptocurrency venture comes today from the U.S. Securities and Exchange Commission. In a fresh criminal charging document released Thursday morning, KPIX reports that San Francisco-based crypto firm Block Bits Capital’s two founders have been charged with fraud, for a scheme wherein they claimed to have an “auto-trading bot” that was making a killing on the market, but in fact, they were doing the trades by hand whilst losing hundreds of thousands of their investors’ dollars.
“The SEC alleges that the San Francisco-based Block Bits entities, [Japheth] Dillman and [David] Mata raised almost $1 million from over 20 investors based on misrepresentations about an automated digital asset trading bot that was never functional.,” the SEC said in a release. “Dillman also falsely claimed that the fund’s assets were invested in purported risk-free ‘cold storage’ deals, when in reality Dillman and Mata used the funds for high-risk loans.”
There is a cached version of their website still online, and the SEC obtained a pitch deck the duo used to sell investors on this supposed crypto auto-trading bot. “We have seen an incredible increase in the performance of the auto-trader over letting the currency sit or be managed by hand,” they claimed in their pitch deck.
But according to their SEC charging document, “In reality, Block Bits never completed development of the auto-trader and only funded early stage development efforts. No functional auto-trader was ever tested or deployed and all of the trading of Fund assets was done by Mata manually.”
Yet knowing this, the pair still sent investors information describing the crypto bot tool’s returns as “jaw dropping,” “eye-popping,” and “insane.”
According to their charging document, “In reality, Dillman fabricated the performance ‘results.’”
According to the SEC release, Mata has agreed to “entry of a judgment,” which is basically paying money back and agreeing to stay out of anything investment-related. KPIX notes that these charges carry a “maximum statutory prison sentence of 20 years. In addition, the charge carries a maximum $250,000 fine and three years of supervised release,” but those still penalties seem pretty easy to plea down from.
Image: FTX advertisement