New York investment firm Gelfman Blueprint, Inc. (GBI) will see over $2.5 million in fines for fraudulent practices, as filed by the Commodity Futures Trading Commission (CFTC). According to the agency, this marks the first time that CFTC has made an anti-fraud enforcement action involving bitcoin.
Yesterday's CTFC press release states that Gelfman Blueprint Inc. and CEO Nicholas Gelfman engaged in fraudulent practices such as hiding trading losses by giving fake performance reports to customers regarding bitcoin trading. These reports led customers to believe profits had been made on their behalf. Actual records showed only a few trades and customer losses -- not profits.
The CFTC, which initially filed charges against the investment scam last September, described the operation as "a pooled commodity fund that purportedly employed a high-frequency, algorithmic trading strategy, executed by Defendants’ computer trading program called 'Jigsaw.'" GBI started its Ponzi scheme in 2014.
According to a CCN report last year, Gelfman received over $600,000 from 80 different investors over the course of two years.
CFTC Director of Enforcement James Mcdonald stated in yesterday's press release:
"This case marks yet another victory for the Commission in the virtual currency enforcement arena. As this string of cases shows, the CFTC is determined to identify bad actors in these virtual currency markets and hold them accountable. I’m grateful to the members of Enforcement’s Virtual Currency Task Force for their tireless work on these matters."
Although legal proceedings started last year, penalties were not finalized until three days ago. Legal orders concluded that GBI's strategy for customer profit "was fake, the purported performance reports were false, and—as in all Ponzi schemes—payouts of supposed profits to GBI Customers in actuality consisted of other customers’ misappropriated funds," according to a CFTC statement.
Nicholas Gelfman was also deemed liable for GBI's Ponzi scheme actions. Yesterday's press release also revealed, "that Gelfman, to conceal the scheme’s trading losses and misappropriation, staged a fake computer 'hack' that supposedly caused the loss of nearly all customer funds."
Penalties include GBI being ordered to pay over $550,000 back to customers, and Gelfman himself paying about $492,000 to customers. The fraudsters will also pay over $1.8 million in penalties, as well as receive a permanent ban from trading and registration.
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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Last modified (UTC): October 19, 2018 11:34 PM