Two men from Orange County in California were sentenced to prison on Monday for operating a cryptocurrency scam that swindled more than 2,000 investors out of a collective $1.9 million, according to the Department of Justice.
Jeremy McAlpine, 26, and Zachary Matar, 29, founded Dropil Inc. in 2017 and ran the company until March 2020. Dropil purported to be an investment management service and trading program.
Investors were encouraged to purchase Dropil’s native token, DROP, during the company’s initial coin offering in 2018. Through the purchase of DROP, investors were promised access to an automated trading bot called “Dex” that would generate annual returns of up to 63% in DROP and distribute them every 15 days.
According to investigators, however, Dex never operated or generated any profits. McAlpine and Matar lied to both investors and the U.S. Security and Exchange Commission about Dex’s functionality, creating fake profitability reports in response to subpoenas and providing false sworn testimony about the number of investors in the project and amount of money raised during the ICO.
McAlpine and Matar pleaded guilty to one count of securities fraud each in August 2021. On Monday, they were sentenced to federal prison. McAlpine faces a three-year sentence, while Matar faces a two-and-a-half-year sentence.
McAlpine and Matar, along with another defendant, Patrick O’Hara, pleaded guilty to civil securities violations filed by the SEC in July 2021.