Federal jury convicts Block Bits founder in crypto fund fraud case

The Justice Department said Dillman, 48, and a co-conspirator raised nearly $1 million from more than 20 investors by claiming that Block Bits Capital had a completed, working automated cryptocurrency-trading tool. The government said the tool was not working, investor funds were not used as promised and losses were concealed with false claims about trading profits.

The promised bot was the central claim

According to the DOJ account, the fund marketed an “Autotrader” that was supposed to profit from automated arbitrage across exchanges. Dillman and his associates instead used investor money for payments to themselves and risky investments in other cryptocurrency ventures, while telling investors that the fund's trading activity was profitable.

The verdict establishes Dillman's criminal liability for the counts presented to the jury. The descriptions of how the fund operated and how investor money was used are the prosecution's account of the evidence presented at trial, not a finding that every crypto-trading strategy or automated system is fraudulent.

Sentencing is scheduled for December

Dillman is currently released on bond, and sentencing is scheduled for Dec. 8, 2026. The DOJ said each count carries a maximum statutory penalty of 20 years in prison and a $250,000 fine, but the eventual sentence will be set by the court after considering the sentencing guidelines and other statutory factors.

The practical lesson is narrower than the case's crypto label: investors need evidence that a claimed trading mechanism exists, that assets are held as represented and that reported returns can be reconciled to independently verifiable records.