Japheth Dillman, founder of cryptocurrency trading fund Block Bits Capital, was found guilty of wire fraud and conspiracy by a federal jury in San Francisco. Authorities said Dillman misled investors about the fund’s automated trading technology, raising nearly $1 million from over 20 individuals between June 2017 and August 2018.
Fraudulent Claims and Misuse of Funds
Dillman, 48, assured investors that Block Bits’ proprietary software, the Autotrader, was fully functional and would generate returns through automated cryptocurrency trading. However, according to prosecutors, the trading algorithm did not work, and Dillman was aware of its shortcomings.
Prosecutors stated that Dillman and an unnamed co-conspirator instead used investor funds to pay themselves and make speculative investments in other crypto entities. These risky positions led to significant losses, contradicting Dillman’s claims to investors that Block Bits was achieving strong profits.
Dillman told investors their money was managed by advanced trading software, but in reality, the technology was non-functional and funds were diverted for personal gain and high-risk investments that subsequently failed.
Despite mounting losses, Dillman reportedly continued informing investors that the fund was performing well. The discrepancies were eventually brought to light through a federal investigation led by the FBI and IRS Criminal Investigation, with assistance from the Securities and Exchange Commission’s San Francisco office.
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AAPLThe 10-day trial was presided over by U.S. District Judge Richard Seeborg. Dillman was convicted on all counts and is scheduled for sentencing on December 8. He remains free on bond pending his appearance in court. Each charge carries a potential sentence of up to 20 years in prison and a $250,000 fine, with the final penalty to be determined under federal sentencing guidelines.
Block Bits Capital, founded in San Francisco, positioned itself as an automated cryptocurrency investment firm that promised clients robust technology-driven gains.
Mini dictionary: Block Bits Capital, a cryptocurrency trading fund that promised investors algorithmic, automated crypto trading, was founded by Japheth Dillman and has now collapsed due to fraudulent activity.
Surge in Crypto-Related Fraud Losses
A recent report by the Consumer Federation of America estimated that Americans lost $80.7 billion to crypto-related scams and cybercrime in 2025. The organization based its estimate on figures from the FBI, which recorded $11.37 billion in reported crypto scam losses last year—an increase of 22% compared to 2024.
The Consumer Federation of America, a coalition of nonprofit consumer advocacy groups, adjusted the FBI’s figures based on a previous Bureau of Justice Statistics survey that concluded only 14% of fraud cases are reported to law enforcement.
According to the FBI, cryptocurrency scams represented more than half of all reported scam and cybercrime losses in the United States last year, with investment schemes comprising the largest share at $8.6 billion, a 32% rise from 2024.
| Metric | 2024 | 2025 |
|---|---|---|
| Crypto scam losses (FBI reported) | $9.32 billion | $11.37 billion |
| Investment scheme losses | $6.52 billion | $8.6 billion |
| CFA estimated total crypto scam losses | — | $80.7 billion |
Officials highlighted that the true scale of losses is likely much higher, as the majority of victims do not report their experiences to authorities. The Consumer Federation of America recommended ongoing vigilance and robust consumer protection measures in response to these trends.
