Two men from Orange County have been sentenced to jail time for a crypto scam that resulted in $1.9 million in losses.
Yesterday, the Justice Department announced that two men from Orange County had been sentenced to federal prison for 36 months for defrauding more than 2,000 investors out of $1.9 million by tricking them into purchasing a cryptocurrency that purportedly gave them unique access to a highly profitable trading program.
The offenders are Jeremy McAlpine and Zachary Matar, who, in August 2021, both pleaded guilty to one count of securities fraud.
How They Did It
Dropil Inc., a Belize-based firm situated in Fountain Valley, was created by McAlpine and Matar in 2017. A cryptocurrency developed by McAlpine and Matar, known as DROPs, launched after an initial coin offering (ICO). It was one of the digital assets that Dropil invested in and managed for its thousands of clients. A trading bot dubbed “Dex” was also developed by McAlpine and Matar for Dropil’s digital asset trading platform, which could only be used using the DROPs token.
Among other untrue statements, An average annual return between 24% and 63% could easily be earned by using the DEX trading bot, depending on the risk profile chosen by the investors.
According to McAlpine and Matar, their false claims about the functionality and profitability of Dex and the number and volume of investors who had already invested in DROPs increased the token’s value as a result of the basic principle of supply and demand. These false claims led investors to purchase hundreds of millions of so-called “DROPs” tokens.
Through the purchase and selling of roughly 629 million DROPs by 2,472 investors, the offenders were able to receive a total of about $1,896,657 ($1.89M). The Justice Department further accused McAlpine and Matar of using the money for their personal and associate benefits.
The prosecution stated in sentencing memos that the defendant’s acts were grave and worrisome because they caused considerable financial loss to many victims and included efforts to thwart law enforcement’s efforts to investigate and resolve the misconduct.
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