Two California men agree to plead guilty to fraud charges in connection with $1.8M ICO
July 3, 2021, 2:07PM EDT
1 min read
The Justice Department said Friday that two men from Orange County, California, have agreed to plead guilty to securities fraud charges in connection with a $1.8 million initial coin offering.
The DOJ's case centered around the actions of Dropil Inc and its two founders, Jeremy McAlpine and Zachary Matar, who will submit their pleadings in the coming weeks, per the Friday release.
According to prosecutors, McAlpine and Matar allegedly sold so-called DROP tokens to thousands of investors, with the funds ostensibly intended to fund the activities of a crypto trading bot. Per the DOJ, neither McAlpine or Matar registered with the Securities and Exchange Commission. Yet "[t]o induce investors to purchase DROPs, McAlpine and Matar made a series of false statements to investors in a 'White Paper' published on Dropil’s website and on its Twitter account, promoting the cryptocurrency’s supposed success,"
As the DOJ noted:
"The defendants also manufactured fake Dex profitability reports and made payments in the form of DROPs to Dex users, giving the false appearance that Dex was operational and profitable. McAlpine and Matar also made false statements about the volume and dollar amount of DROPs sold both during and after the ICO, stating Dropil had successfully raised $54 million from 34,000 investors both foreign and domestic. In fact, the ICO raised less than $1.9 million from fewer than 2,500 investors."
"In total, the defendants obtained approximately $1,896,657 from 2,472 investors through the sale of approximately 629 million DROPs. But McAlpine and Matar did not use at least $1.6 million of the invested money as promised, using it instead to fund disbursements to themselves and their associates," the DOJ continued.
McAlpine and Matar previously agreed to settle with the SEC in connection with a civil suit filed by the U.S. securities regulator in 2020.
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