Bitcoin Hedge Fund Fined $2.5 Million for Operating A Ponzi Scheme

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Photo Credit: Reach-West

Cryptocurrency hedge fund, Gefman Blueprint. Inc. (GBI) and its CEO Nicholas Gelfman have been ordered by a New York based federal court to pay over $2.5 million for operating a fraudulent Ponzi scheme. Established in 2015 as a Bitcoin Hedge fund company, GBI stated in 2015 that it had 85 customers and 2,367 BTC under management.

This new order is in furtherance of the initial anti-fraud enforcement action filed by the US commodity Futures Trading Commission (CFTC) against the company in September 2017. The Commodity Future Trading Commission had accused the company of running a Ponzi scheme between 2014 and 2016, where it told investors that it had developed a computer program code named “Jigsaw” which allowed for a significant return via a commodity fund.

Following this announcement, it was reported that GBI and its CEO fraudulently solicited for over $600,000 from 80 unsuspecting customers. Again, Gelfman launched a fake computer hack to hide the scheme’s loses, which resulted in the loss of almost all customers investments.

With the current charge, GBI and its owners have been asked to pay over $2.5 million in monetary penalties and restitution. And while the company has been asked to pay $554,734.48 and $492,064.53 in restitution to customers they have also been charged to pay $1,854,000 and $177,501 respectively in civil monetary penalties.

According to James McDonald, Director of Enforcement at the CFTC, “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.”

Elsewhere, the CFTC had recently filed a law suit with the U.S. District Court for the Northern District of Texas against two defendants who fraudulently solicited bitcoin from unsuspecting investors. The two defendants Morgan Hunt and Kim Hecroft were said to be operating two fraudulent businesses and misleading investors into investing in forex, diamond and binary options.