(HedgeCo.Net) The Securities and Exchange Commission has charged Block Bits Capital, LLC, Block Bits Capital GP I, LLC and their co-founders Japheth Dillman and David Mata, with conducting a fraudulent unregistered securities offering.
The SEC alleges that the San Francisco-based Block Bits entities, Dillman and Mata raised almost $1 million from over 20 investors based on misrepresentations about an automated digital asset trading bot that was never functional. 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 and to invest in the AML Bitcoin initial coin offering, which the Commission has alleged was a fraudulent unregistered securities offering in SEC v. NAC Foundation, LLC, et al., N.D. Cal. case no. 3:20-cv-04188, filed June 25, 2020.
The U.S. Attorney’s Office for the Northern District of California announced parallel criminal actions against Dillman and Mata, charging each of them with wire fraud.
The SEC’s complaints, filed in federal court in San Francisco, charge the Block Bits entities, Dillman and Mata with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), (2) and (4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The complaints seek permanent injunctions, disgorgement with prejudgment interest, and civil penalties, as well as injunctions prohibiting the Block Bits entities, Dillman and Mata from participating in future securities offerings.
Mata has agreed to entry of a judgment, subject to court approval, imposing permanent and conduct-based injunctions and ordering him to disgorge $75,000 plus prejudgment interest of $11,624, and reserving the issue of a civil penalty for further determination by the court. Mata also has agreed to entry of an order in administrative proceedings pursuant to Section 203(f) of the Advisers Act barring him from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization.
