Two Orange County men expected to plead guilty in $1.8-million cryptocurrency swindling case
Two Orange County men stand accused by federal prosecutors of swindling thousands of investors into purchasing $1.8 million in cryptocurrency that allegedly provided exclusive access to a trading program that they falsely claimed was profitable.
Jeremy David McAlpine, 25, of Fountain Valley, and Huntington Beach resident Zachary Michael Matar, 28, each face one count of securities fraud and are expected to plead guilty, according to plea agreements filed on July 2. The United States Attorney’s Office said in a statement prosecutors expect the two to do so in the coming weeks.
Court documents say the duo ran the operation out of Dropil, Inc., a Belize-based company that operated out of Fountain Valley that managed digital investments, which are defined as an asset that is issued and transferred using distributed ledger or blockchain technology, like Bitcoin cryptocurrency.
Neither man is registered with the Securities and Exchange Commission as a broker or dealer, nor is Dropil, prosecutors said.
Through Dropil, McAlpine and Matar developed their own digital asset called DROP tokens and a digital asset trading program, an automated trading bot called “Dex.”
The program could only be used with DROP tokens, which meant that only investors in that currency could access Dex.
Federal prosecutors said the two men enticed people into investing in DROPs by falsely claiming that the program was functional and profitable, describing it as an “expertly managed portfolio balancing algorithm [that] manages risk.”
McAlpine and Matar are also alleged to have told investors that the DROP tokens ensured privacy while offering added value and exclusivity. They also further promised that the program’s trading would lead to profits that would be distributed as additional DROP tokens every 15 days, according to prosecutors.
Prosecutors said the two made a variety of false claims to potential investors, including a white paper published to Dropil’s website, its Twitter account and fake profitability reports.
Both the company’s website and its Twitter account, as of Wednesday afternoon, are still online.
The duo falsely claimed that Dropil raised $54 million from 34,000 investors both foreign and domestic when they had, in actuality, raised less than $1.9 million from fewer than 2,500 investors. Of the $1.8 million raised, McAlpine and Matar are alleged to have used $1.6 million of it to pay themselves or associates instead of investing it.
The U.S. Securities and Exchange Commission filed charges against Dropil and its founders in April last year.
McAlpine and Matar have, according to prosecutors, entered an agreement with the U.S. Securities and Exchange Commission that bars them from directly or indirectly offering, purchasing or selling digital securities.
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