On April 27, 2022, the Securities and Exchange Commission (the “Commission” or “Plaintiff”), represented by Alice L. Jensen, attorney at SEC’s San Francisco Regional Office, filed a civil enforcement lawsuit against Block Bits Capital, LLC (“Block Bits Capital”), Block Bits Capital GP I, LLC (“Block Bits GP”) (collectively, “Block Bits”), Japheth Dillman (“Dillman”) and David Mata (“Mata”), (collectively “Defendants”), seeking injunctive relief, disgorgement of allegedly ill-gotten gains, and civil monetary penalties for the alleged fraudulent and unregistered offer and sale of securities. This case was filed in the U.S. District Court in the Northern District of California.
In the complaint, the plaintiff alleged, “Defendants engaged in the fraudulent and unregistered offer and sale of securities. Dillman was the primary architect of the fraud, and with his co-founder and co- Managing Director, Defendant David Mata (‘Mata’), Block Bits and Dillman promoted the offering and raised at least $960,000 for the Fund from approximately 22 retail investors, from at least July through December 2017. The Commission has filed a separate action against Block Bits and Dillman.”
The plaintiff further alleged, “Block Bits’ offering materials falsely stated that it had developed an in-house proprietary auto-trading bot, which would trade a hundred different digital assets or ‘cryptocurrencies’ over thirty different trading platforms based on parameters defined by Block Bits to maximize returns for the Block Bits Fund I, LP (the ‘Fund’) in which investors purchased securities.”
The plaintiff also alleged, “In reality, Block Bits never developed a functional auto-trading bot. The only trading for the Fund was done manually by Mata through a digital asset trading platform account. Dillman also misrepresented to Block Bits investors that 40% of the Fund’s assets were invested in ‘cold storage’ (offline) deals that would generate substantial returns and be held in risk-free conditions.”
The plaintiff then alleged, “In reality, at no time were any of the Fund’s assets stored in offline wallets or other risk-free ‘cold storage’ to generate returns. Instead, Dillman and Mata used the investor funds to continue manually trading and for investments that carried significant risk, including unsecured loans and an investment in a related company’s initial coin offering of another digital asset, AML Bitcoin. Plaintiff also has alleged AML Bitcoin was a fraudulent unregistered offering.”
The plaintiff presented five claims for relief. The first three were for alleged violations of section 10(b) of the Exchange Act, Rule 10b-5(a) and (c), violations of sections 17(a)(1) and (3), and sections 5(a) and (5)(c) of the Securities Act. The last two claims were for alleged violations of sections 206(1), 206(2), and section 206(4) of the Advisers Act.
In the prayer for relief, the plaintiff requested the court permanently enjoin Defendant from directly or indirectly participating in the issuance, purchase, offer, or sale of any security, except for purchasing or selling securities for his own personal account. Plaintiff also requested disgorgement of allegedly ill-gotten gains, pre-judgment interest, a civil monetary penalty, and other appropriate relief.
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Pending - Other Pending
Finance - Security/Commodity/Exchange
Securities and Exchange Commission
Alice L. Jensen
Attorney at Securities and Exchange Commission
44 Montgomery Street, Suite 2800
San Francisco, CA 94104
Civil Cover Sheet
Consent of David Mata
Docket(#2) Proposed Order Judgment by Securities and Exchange Commission. (Attachments: #1 Consent of David Mata)(Jensen, Alice) (Filed on 4/27/2022) (Entered: 04/27/2022)Read MoreRead Less
Docket(#1) COMPLAINT Securities and Exchange Commission against David Mata. Filed bySecurities and Exchange Commission. (Attachments: #1 Civil Cover Sheet)(Jensen, Alice) (Filed on 4/27/2022) (Entered: 04/27/2022)Read MoreRead Less