California Men Sentenced to Prison after Pleading Guilty to $1.9M Crypto Scam

The California duo ran a crypto scam operation for more than two years and are now set to serve a cumulative sentence of over 4 years.

A pair of men in California got slammed with prison sentences for running a crypto scam that swindled over 2,000 investors out of a collective $1.9 million.

Jeremy McAlpine, 26, and Zachary Matar, 29, founders of Dropil Inc, pled guilty to one count each of securities fraud last August. According to reports, the duo founded Dropil in 2017 and ran the company until March 2020.

More on the Dropil California Crypto Scam

According to the Department of Justice, Dropil purported to be an investment management service and trading program. In addition, the company encouraged investors to purchase its native token DROP at an initial coin offering (ICO) in 2018. By purchasing DROP, investors were to access an automated trading bot called “Dex” that would reward their investments. The state rewards include annual returns of up to 63% in DROP, receivable every 15 days. Part of the Department of Justice’s report read:

“McAlpine and Matar induced investors to purchase DROPs by making false claims about DROPs, the functionality and profitability of Dex, and the number of investors and volume of investment in DROPs that had purportedly already been achieved and that purportedly enhanced – through the operation of supply and demand – the value of DROPs.”

Furthermore, the law-enforcing and justice-dispensing federal executive department of the US government also stated in its release:

“Dex was said to provide an “expertly managed portfolio balancing algorithm [that] manages risk,” according to information published on Dropil’s website. The DROP tokens were said to “ensure privacy while also offering added value and exclusivity.”

The Verdict

However, investigators state that Dex never operated or generated any profits. The investigation also revealed that McAlpine and Matar lied to investors and the Securities and Exchange Commission (SEC) about Dex’s functionality. In a bid to cover up their crypto scam, the California duo created fake profitability reports in response to subpoenas. Furthermore, the accused also sought to provide false sworn testimony about the number of investors in the project. The bogus testimony also falsely attested to the money the company raised at its DROP ICO.

Among other things, the Department of Justice accused the defendants of causing financial harm to a large number of victims. The sentencing memoranda also said the men deliberately derailed efforts by authorities to investigate and address the problem.

In July 2021, as part of a separate SEC civil case, McAlpine, Matar, and Dropil agreed to permanent injunctions. The settlement required them to stop any fraudulent activity that allowed them to benefit from digital securities.

McAlpine and Matar ended up pleading guilty to one count of securities fraud each back in August 2021. As a result, the duo received federal prison sentences on Monday. While Matar faces a two-and-a-half-year sentence, McAlpine’s verdict is a three-year sentence.

Altogether, McAlpine, Matar, alongside another defendant, Patrick O’Hara, pleaded guilty to civil securities violations filed by the SEC in July 2021.

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Tolu Ajiboye

Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.