Two Founders of Dropil Agree to Plead Guilty to Securities Fraud

Fazzaco learned that Dropil Inc.’s two founders, Jeremy David McAlpine, 25, and Zachary Michael Matar, 28, of Huntington Beach, have agreed to plead guilty to the charge of securities fraud.

Specifically, McAlpine and Matar founded Dropil in 2017, a Belize-based company operating out of Fountain Valley. Dropil provided and managed investments in digital assets such as cryptocurrency. The defendants primarily were responsible for the development of Dropil’s digital asset, called DROP tokens, as well as its digital asset trading program, an automated trading bot called “Dex.” Purchasers of DROPs had access to Dex, which could only be used with DROP tokens.

Neither McAlpine, Matar nor Dropil was registered with the Securities and Exchange Commission (SEC) as a broker or dealer. They induced investors to purchase DROPs by making false claims about the functionality and profitability of Dex, which was said to provide an “expertly managed portfolio balancing algorithm [that] manages risk,” according to information published on Dropil’s website. The DROP tokens were said to “ensure privacy while also offering added value and exclusivity.” Dropil further promised that Dex’s trading would generate profits that would be distributed as additional DROP tokens every 15 days.

In January 2018, the defendants launched an initial coin offering (ICO) for the sale of DROPs, again through Dropil’s website. To induce investors to purchase DROPs, McAlpine and Matar made a series of false statements to investors in a “White Paper” published on Dropil’s website and on its Twitter account, promoting the cryptocurrency’s supposed success.

McAlpine and Matar also made false statements about the volume and dollar amount of DROPs sold both during and after the ICO, stating Dropil had successfully raised $54 million from 34,000 investors both foreign and domestic. In total, the defendants obtained approximately $1,896,657 from 2,472 investors through the sale of approximately 629 million DROPs.