DROP Token Founders Jeremy McAlpine and Zachary Matar Sentenced Over $1.9M ICO Scam


Jeremy McAlpine and Zachary Matar, founders of now-defunct digital asset firm Dropil, have been sentenced to US federal prison for their involvement in an ICO scam that defrauded more than 2,000 investors of around 1.9 million of dollars.

According to a central district of the California Department of Justice (DOJ) Press releaseMcAlpine, 26, and Matar, 29, each pleaded guilty to one count of securities fraud in August 2021. McAlpine will serve a three-year sentence, while Matar’s sentence is two and a half years .

The prosecution of the two was led by the head of the DOJ’s Major Fraud Section, Assistant United States Attorney Ranee A. Katzenstein. In sentencing memoranda, prosecutors argued that the defendants’ “offences were serious and disturbing.”

“They caused significant financial harm to a very large number of victims and resulted in efforts to derail law enforcement attempts to root out and address wrongdoing,” he added.

According to the details of the deal, the two founded Dropil in 2017, incorporating it in Belize while operating out of Fountain Valley. The company provided and managed investments in a digital token called DROPs and an automated digital asset trading “bot” called Dex that used DROPs as its native token.

The founders tricked over 2,000 investors into investing in their token using false claims, including falsifying Dex’s functionality and profitability, the number of investors and the volume of investment in DROPs that allegedly already been made, and the value of DROP.

The false claims were uncovered by the SEC, which opened an investigation into the company in 2020. The SEC found that Dropil only raised about $1.9 million while claiming to have raised more than $54 million. dollars through its 2017-2018 ICO DROPs, which sold 600 million tokens.

The two pleaded guilty to the SEC securities fraud charges and settled with the commission in July 2021. The SEC also imposed a permanent injunction restraining them from continuing their fraudulent activities.

Regulators still investigating ICO-era scams

The era of ICO craze in 2017 continued to plague the brief history of the digital asset industry. By a Bloomberg reportinitial coin offerings (ICOs), which were very popular during the period, are one of the reasons why the digital asset market is subject to a lot of regulatory scrutiny to this day.

Digital assets and blockchain startups have raised billions of dollars through ICO crowdfunding during this time. But many of them have gone bankrupt with investors’ funds, never having fulfilled the promises made or even having been discovered to have made false declarations.

The crimes of the time were also used to warn investors against Decentralized Autonomous Organizations (DAOs).

Watch: BSV panel Global Blockchain Convention, Law & Order: Regulatory Compliance for Blockchain & Digital Assets

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