Court Fines Bitcoin Ponzi Scheme Operator $2.5 Million

Court Fines Bitcoin Ponzi Scheme Operator $2.5 Million

The details were released through the press release where CTFC alleged GBI's CEO Nicholas Gelfman for taking part in fraud schemes and manipulating the unsuspecting customers.

According to the information on the company's website, in 2015, the fund had 85 customers. Actual records showed only a few trades and customer losses - not profits.

A U.S. Federal Court recently indicted Gelfman Blueprint Inc.

"This case marks yet another victory for the Commission in the virtual currency enforcement arena", said James McDonald, CFTC Director of Enforcement. Furthermore, he added, "As this string of cases shows, the CFTC is determined to identify bad actors in these virtual currency markets and hold them accountable". This was the first anti-fraud enforcement action that the CFTC brought related to bitcoin, according to statements. The CFTC charged GBI for allegedly running a Ponzi scheme from 2014 to 2016, telling investors that it had developed a computer algorithm called "Jigsaw" which allowed for substantial returns through a commodity fund. Yesterday's press release also revealed, "that Gelfman, to hide the scheme's trading losses and misappropriation, staged a fake computer "hack" that supposedly caused the loss of almost all customer funds".

The Commission's Virtual Currency Task Force led the investigation against GBI and Gelfman.

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According to the reports from CCN, the legal proceeding started in 2017, but the penalties were confirmed this week. Justice P. Kevin Castel accepted CFTC charges of fraud, misappropriation and the issuance of false Bitcoin investment reports to unsuspecting investors after a court battle that lasted more than a year.

Per the announcement, GBI and Gelfman fraudulently solicited over $600,000 from at least 80 customers. The company suspected planned on profiting the customers through the losses of other customers' funds.

The GBI will have to pay more than $550,000 back to their customers, and the Nicholas Gelfman will pay $492,000 himself. In addition, Gelfman is accused of embezzling the remaining pooled monies after he "staged a fake computer hack created to hide trading losses and misappropriation", the court says.

In addition to fiscal penalties, the court imposed permanent registration and trading bans and a permanent injunction from future violations of federal commodities laws.

Yesterday's release concluded with a statement that, "The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable".

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