A federal jury has convicted Japheth Dillman of wire fraud and conspiracy over the collapse of the crypto fund Block Bits Capital.

Dillman told investors the fund’s automated trading software was complete and working, when he knew it was not. He and a co-conspirator used the money to pay themselves and to make speculative bets that lost heavily.

A federal jury in San Francisco convicted the founder of a cryptocurrency trading fund of wire fraud and conspiracy after prosecutors showed he sold investors on trading software he knew did not work, the Justice Department said on Monday.

Japheth Dillman, 48, raised close to $1 million from more than 20 investors in Block Bits Capital between June 2017 and August 2018. He told them the fund would generate profits from automated cryptocurrency trading powered by a proprietary tool called the Autotrader, which he claimed was complete and working.

#FBI #SF Case Update: A federal jury has convicted Japheth Dillman, founder of the cryptocurrency trading fund Block Bits Capital, for defrauding investors. Dillman falsely claimed the fund used advanced algorithmic trading to generate returns. In reality, he misled investors and… pic.twitter.com/OYgz1qCUmg — FBI SanFrancisco (@FBISanFrancisco) August 25, 2026

In fact, prosecutors said the algorithm did not function and Dillman knew it, meaning investor money could not be used the way he had promised. He and a co-conspirator, who was not named in the announcement, instead paid themselves and put the rest into speculative positions in other crypto ventures while telling investors the money was in something safer.

Those bets lost heavily, and Dillman later told investors that Block Bits’ trading had produced significant profits, when in fact it had produced additional losses. The case adds to a broader record of crypto-related investment fraud prosecutions, where claims about automated systems and trading expertise can make it harder for investors to verify how funds are actually being used.

Sentencing in December

Dillman was convicted after a 10-day trial before U.S. District Judge Richard Seeborg and remains free on bond. He is scheduled to be sentenced on December 8 and faces up to 20 years in prison and a $250,000 fine on each count, with the judge to determine the final term under federal sentencing guidelines.

The FBI and IRS Criminal Investigation conducted the investigation, with assistance from the SEC’s San Francisco office. Assistant U.S. Attorneys Christiaan Highsmith and Charles Bisesto prosecuted the case.

According to the FBI’s complaint center, crypto accounted for more than half of everything Americans reported losing to scams and cybercrime last year. Investment schemes were the largest category at $8.6 billion, up 32% from 2024.

That figure reflects only losses reported to law enforcement. The Consumer Federation of America has argued the true cost is several times higher, saying the overwhelming majority of defrauded victims never file a complaint at all.