Cryptocurrency Entrepreneurs Defrauded $1.9 Mil – Get Prison Sentence

Two cryptocurrency entrepreneurs who defrauded investors out of $1.9 million were given prison sentences in federal court on Monday.

Jeremy McAlpine and Zachary Matar, two cryptocurrency entrepreneurs, were found guilty of securities fraud and given sentences of 3 years and 2.5 years in prison, respectively, according to a statement issued by the U.S. Attorney’s office in California.

McAlpine and Matar formed Dropil, a cryptocurrency startup based in Belize but operating out of Fountain Valley, California, during the 2017 crypto ICO mania. Dropil developed Dex, an automated trading bot that utilized DROP, an altcoin named DROP, and a cryptocurrency trading platform.

According to the press announcement, McAlpine, Matar, and Dropil “made a series of misleading claims to investors,” stating that Dex would produce yearly returns of 24-63 percent. They also failed to register DROP with the Securities and Exchange Commission (SEC).

After receiving subpoenas, McAlpine and Matar “manufactured fake Dex profitability reports, giving the false appearance that Dex was operational and profitable,” and produced additional fictitious documents stating that Dropil had raised $54 million from 34,000 investors when it had actually raised less than $2 million from fewer than 2,500 investors.

The two cryptocurrency entrepreneurs were sentenced on Monday, more than two years after the SEC originally accused them of scamming investors and a year after McAlpine and Matar pleaded guilty to one count of securities fraud each with which they defrauded investors.

Prosecutors stated that the defendants’ “offenses were substantial and troubling: They caused considerable financial injury to an unusually large number of victims and involved efforts to thwart law enforcement’s efforts to ferret out and remedy wrongdoing in sentencing memoranda.

Dropil Inc., McAlpine, and Matar in July 2021 consented to permanent injunctions barring further fraudulent behavior and preventing them from directly or indirectly taking part in the offering, buying, or selling of digital securities as part of the settlement of a separate civil case brought by the SEC.

This summer, the SEC has been very active with crypto-related investigations. In connection with Forsage, which the SEC referred to as “a fraudulent crypto pyramid and Ponzi scheme,” the Commission filed charges against 11 individuals on Monday. Additionally, it has recently opened an investigation into Coinbase to see if the bitcoin exchange is listing unregistered securities.

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