Gaming Company Founder Convicted of Allegedly Defrauding Investors in Nearly $1M Crypto Trading Scheme

A San Francisco-based entrepreneur with roots in the gaming industry has been found guilty of orchestrating a scheme that defrauded investors in a cryptocurrency trading fund of nearly $1 million. On August 24, 2026, a federal jury in the Northern District of California convicted Japheth Dillman, 48, of wire fraud and conspiracy to commit wire fraud.

The verdict came after a 10-day trial before US District Judge Richard Seeborg.

Prosecutors said Dillman helped establish Block Bits Capital and, together with a co-conspirator, raised money from more than 20 investors between June 2017 and August 2018 by making false claims about the fund’s operations and potential returns.

According to evidence presented in court, the pair promoted Block Bits Capital as a vehicle that would generate profits through automated trading of digital assets.

They described a proprietary software tool known as the “Autotrader,” which they claimed the firm had fully developed and was actively using to trade across cryptocurrencies.

In reality, Dillman knew the algorithm did not function as advertised and that investor capital could not be deployed in the manner promised.

Instead of conducting the automated trading described to backers, Dillman and his associate diverted the funds for personal compensation and poured money into high-risk, speculative cryptocurrency projects.

Those side investments produced substantial losses.

Despite the poor results, Dillman continued to assure investors that the fund’s trading activities were delivering strong profits, further concealing the true state of affairs.

Dillman has a background in the gaming sector.

In 2010 he co-founded YetiZen, an accelerator focused on supporting startups in the game industry.

That earlier entrepreneurial experience stood in contrast to the later crypto venture that led to the criminal charges.

The conviction carries significant potential consequences.

Each count of wire fraud and the conspiracy charge carries a statutory maximum of 20 years in prison and a $250,000 fine.

Sentencing is scheduled for December 8, 2026, at 9:30 a.m. before Judge Seeborg.

Dillman remains free on bond pending that hearing.

The court will determine the actual sentence after reviewing the U.S. Sentencing Guidelines and other statutory factors.

The case was investigated by the Federal Bureau of Investigation and the Internal Revenue Service Criminal Investigation division, with assistance from the US Securities and Exchange Commission’s (SEC) San Francisco Regional Office.

Assistant US Attorneys Christiaan Highsmith and Charles Bisesto led the prosecution.

This episode highlights ongoing risks in the cryptocurrency space, where claims of sophisticated automated trading systems have sometimes been used to attract capital without the underlying technology performing as described.

Investors in digital asset funds continue to face the challenge of verifying technical assertions and monitoring how capital is actually put to work.

Federal authorities have repeatedly pursued cases involving misrepresentations about trading algorithms, performance, and the use of investor money.

Dillman’s conviction closes the liability phase of the criminal proceeding but leaves open the questions of punishment and any potential restitution for the affected investors. The December sentencing hearing will provide further clarity on the consequences of the scheme that spanned roughly 14 months and involved roughly two dozen backers.