On Monday, August 1, two Orange County men who admitted to defrauding an investor of $1.9 million in a cryptocurrency offer were incarcerated in federal prison.
Fountain Valley’s Jeremy David McAlpine, 26, was sentenced to three years, while Huntington Beach’s Zachary Michael Mattar, 29, was sentenced to two years, more than a year and six months later. Each admitted to being complicit in securities fraudaccording to the U.S. Attorney’s Office.
According to federal prosecutors, McAlpine and Matar persuaded thousands of investors to buy the cryptocurrency, which the pair claimed would give buyers exclusive access to lucrative trading programs. .
But the trading program wasn’t really profitable, prosecutors said, and the man used most of the $1.9 million raised to pay himself or his associates.
The plan was implemented through Dropil, a Belize-based company that McAlpine and Matar operated in Fountain Valley. The firm focused on investing in digital assets such as cryptocurrencies, but prosecutors said neither the man nor the company itself was registered as a broker or dealer with the Securities and Exchange Commission.
The company touted its own digital asset, which the man called the DROP token, and an automated trading bot called “Dex.” Purchasing cryptocurrencies gave investors access to automated trading bots, according to court filings, as DROP tokens were the only way to use his Dex.
The two men allegedly lied about the profitability of Dex, which they described as “a professionally managed portfolio balancing algorithm.”
To support the false claims, prosecutors say the pair produced fake profitability reports. They claimed he had raised $54 million from more than 34,000 investors, but the actual number was much lower.
As part of a plea bargain, McAlpine and Matar reached an agreement with the SEC barring them from participating in the “offer, purchase, or sale” of digital securities.
In a written sentencing memo filed with the court, the prosecutor described the crimes as “serious and gruesome” and said the two men “caused significant economic harm to so many victims. he added.
McAlpine and Mattar, who were in their early 20s at the time, became obsessed with cryptocurrency-related technology and services in 2017, according to the grounds of judgment filed by the defense.
The two men tried to create a “buzz” or “hype” surrounding the company to boost sales, their lawyers wrote.
“They were young entrepreneurs, excited to be part of a new wave of crypto technology, but they were not aware of the legal requirements that apply to digital assets, or the consequences of failing to comply with those requirements. “I didn’t understand,” outlines the defense’s ruling. read.
The two men regretted making false statements and misusing investor funds and quickly admitted responsibility, their lawyers wrote.
They are scheduled to return to U.S. District Judge Cormac J. Kearney’s court in late September to determine the amount of damages they must pay.