The United States Department of Justice (DOJ) stated on Monday that two individuals from Orange County were sentenced to federal prison for coordinating a $1.9 million initial coin offering (ICO) scam.

Jeremy David McAlpine of Orange County was sentenced to 36 months (3 years) and Zachary Michael Matar was sentenced to 30 months (2 years and 6 months) in federal prison by U.S. District Judge Cormac J. Carney.

The ICO hoax was perpetrated on the official website of the private company Dropil, which McAlpine and Matar founded in 2017. The pair performed an unregistered sale of the company’s native token, DROP, since none of the companies hosting the sale was registered with the United States Securities and Exchange Commission as a broker or dealer (SEC).

In 2018, the creators performed an ICO and raised over $1.9 million from over 2,400 investors who purchased 629 million DROP tokens.

Dropil claimed to provide investment management services for digital assets, enabling investors to trade on the platform. McAlpine and Matar persuaded users to purchase and trade DROP tokens by claiming that the transactions would create profits that would be “distributed every 15 days in the form of extra DROP tokens.”

To further mislead investors, the firm fabricated a white paper that falsely depicted it as a thriving business that offered risky investors significant yearly rates ranging from 24 to 63 percent.

When approached by the U.S. SEC over the unregistered ICO, Dropil submitted false information by misrepresenting the firm’s financial stability. Dropil went on to publish a fraudulent report indicating that their token sale received $54 million from 34,000 investors, while in reality just $1.9 million was raised.

While McAlpine and Matar are now being sentenced to jail, the DOJ intends to recompense the 2,472 victims of the ICO fraud. On September 26, Judge Carney has scheduled a restitution hearing.

In the meanwhile, a separate report reported that the U.S. SEC has filed charges against the four founders of Forsage in connection with a $300 million crypto Ponzi scam.

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