The US Department of Justice has announced the guilty plea of two California residents accused of securities fraud for $1.9 million as part of an initial coin offering (ICO). The creators of the Dropil Inc crypto project, Jeremy McAlpine and Zachary Matar, are preparing to make confessions in the coming weeks, the publication says.
Dropil positioned itself as a developer of tools for automating the analysis, exchange and storage of cryptocurrencies. It was assumed that users will be given access to an automated trading robot (Dex), which will be based on several supervised bots and strategies.
According to the prosecution, McAlpine and Matar sold DROP tokens to thousands of investors, promising to use the raised funds in trading cryptocurrencies using a bot. The Ministry of Justice says that none of them has registered with the US Securities and Exchange Commission (SEC).
"In order to persuade investors to buy DROP, McAlpine and Matar distributed a series of misleading statements among investors about the "white paper" published on the Dropil website and on their Twitter account, thus describing the alleged success of the cryptocurrency in front of them," the authorities said in a statement.
The Ministry of Justice also noted that the defendants issued fake reports on the profitability of Dex and made payments using DROP tokens to users, which created a false impression that the platform was working and making a profit. In addition, they overestimated the amount of funds raised by selling DROP during and after the ICO. It was assumed that Dropil successfully attracted $54 million from 34,000 investors within the country and from abroad, but in reality, as the investigation found, the total amount of collected assets at the ICO did not exceed $1.9 million, and the number of investors – 2,500.
"In total, the defendants received about $1,896,657 from 2,472 investors through the sale of approximately 629 million drops. Contrary to their promises, McAlpine and Matar did not use at least $1.6 million of the raised money in the project, instead using it to pay themselves and related persons," the report says.
In 2020, McAlpine and Matar settled claims with the SEC in a civil lawsuit.