Another One Bites the Dust: Federal Court Bags $2.5M Bitcoin Ponzi Scheme
- Gelfman Blueprint Inc. and CEO Nicholas Gelfman misappropriated customers' funds for years.
On Thursday, October 18, a Federal Court in New York officially ordered a $2.5 million fine on Gelfman BluePrint, Inc. (GBI), and Nicholas Gelfman, the company’s CEO. GBI has been operating as a Bitcoin hedge fund since it was incorporated in 2014, and had as many as 85 users and 2,367 BTC under its management as of 2015.
The US Commodity Futures Trading Commission (CFTC) originally came after the company in September of last year. At the time, GBI told its customers that it was using an algorithm called ‘jigsaw’ to earn substantial returns on investors’ funds. It was all a lie--the algorithm was fake, and the “returns” that some investors got consisted of the misappropriated funds of other investors.
Gelfman Staged a Fake ‘Hack’ to Cover Up Losses
According to the statement published by the CFTC, “defendants Gelfman and GBI, by and through its officers and agents and employees, operated a Bitcoin Bitcoin While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that Read this Term Ponzi scheme in which they fraudulently solicited more than $600,000 from at least 80 customers.” Eventually, nearly all user funds were lost.
Over the course of the company’s existence, Gelfman provided false performance reports to pool participants to show false records of profitable BTC trades. At one point, Gelfman orchestrated a fake “hack” to try and explain the massive losses.
“This case marks yet another victory for the Commission in the virtual currency enforcement arena,” said CFTC Director of Enforcement James McDonald in an official statement. “As this string of cases shows, the CFTC is determined to identify bad actors in these virtual currency markets and hold them accountable.”
.@giancarloCFTC details to #FIAExpo the @CFTC’s record enforcement achievements this year:
* Record # of actions; * More penalties; * Record # of large cases; * More cases for manipulative conduct & spoofing; * Record # of Whistleblower Whistleblower A whistleblower is an individual who manages to provide information or activity within a private or public organization that is deemed illegal, unethical, or not correct. In many countries, including the United States, whistleblowers are protected by law and in some cases can even recoup rewards if their information leads to successful prosecution.In the context of the financial services industry, whistleblowers play a large role in oversight, helping unmask several episodes of illicit behavior A whistleblower is an individual who manages to provide information or activity within a private or public organization that is deemed illegal, unethical, or not correct. In many countries, including the United States, whistleblowers are protected by law and in some cases can even recoup rewards if their information leads to successful prosecution.In the context of the financial services industry, whistleblowers play a large role in oversight, helping unmask several episodes of illicit behavior Read this Term awards; * More C-Suite accountability. — CFTC (@CFTC) October 17, 2018
Of the $2.5 million that Gelfman and GBI were ordered to pay, roughly $1 million will go towards customer restitution; the rest of the fines are civil monetary penalties.
The Second Company Operating as a Crypto Hedge Fund to Get Taken Down this Year
This is the second time in recent months that a US regulator has targeted a company operating as a cryptocurrency hedge fund. Last month, the SEC issued a cease-and-desist order to a hedge fund called ‘Crypto Asset Management’ and its founder, Timothy Enneking.
At the time, the SEC alleged that although the fund had described itself at one point as the ‘first regulated crypto asset fund in the United States,’ it had never actually registered as an investment company.
These two cases may or may not be a part of ‘Operation Cryptosweep.’ The US SEC, CFTC, and a number of other financial regulators and law enforcement bodies in the North American Securities Administrators Association teamed up earlier this year under the Operation to eliminate fraud from the crypto space.
On Thursday, October 18, a Federal Court in New York officially ordered a $2.5 million fine on Gelfman BluePrint, Inc. (GBI), and Nicholas Gelfman, the company’s CEO. GBI has been operating as a Bitcoin hedge fund since it was incorporated in 2014, and had as many as 85 users and 2,367 BTC under its management as of 2015.
The US Commodity Futures Trading Commission (CFTC) originally came after the company in September of last year. At the time, GBI told its customers that it was using an algorithm called ‘jigsaw’ to earn substantial returns on investors’ funds. It was all a lie--the algorithm was fake, and the “returns” that some investors got consisted of the misappropriated funds of other investors.
Gelfman Staged a Fake ‘Hack’ to Cover Up Losses
According to the statement published by the CFTC, “defendants Gelfman and GBI, by and through its officers and agents and employees, operated a Bitcoin Bitcoin While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that Read this Term Ponzi scheme in which they fraudulently solicited more than $600,000 from at least 80 customers.” Eventually, nearly all user funds were lost.
Over the course of the company’s existence, Gelfman provided false performance reports to pool participants to show false records of profitable BTC trades. At one point, Gelfman orchestrated a fake “hack” to try and explain the massive losses.
“This case marks yet another victory for the Commission in the virtual currency enforcement arena,” said CFTC Director of Enforcement James McDonald in an official statement. “As this string of cases shows, the CFTC is determined to identify bad actors in these virtual currency markets and hold them accountable.”
.@giancarloCFTC details to #FIAExpo the @CFTC’s record enforcement achievements this year:
* Record # of actions; * More penalties; * Record # of large cases; * More cases for manipulative conduct & spoofing; * Record # of Whistleblower Whistleblower A whistleblower is an individual who manages to provide information or activity within a private or public organization that is deemed illegal, unethical, or not correct. In many countries, including the United States, whistleblowers are protected by law and in some cases can even recoup rewards if their information leads to successful prosecution.In the context of the financial services industry, whistleblowers play a large role in oversight, helping unmask several episodes of illicit behavior A whistleblower is an individual who manages to provide information or activity within a private or public organization that is deemed illegal, unethical, or not correct. In many countries, including the United States, whistleblowers are protected by law and in some cases can even recoup rewards if their information leads to successful prosecution.In the context of the financial services industry, whistleblowers play a large role in oversight, helping unmask several episodes of illicit behavior Read this Term awards; * More C-Suite accountability. — CFTC (@CFTC) October 17, 2018
Of the $2.5 million that Gelfman and GBI were ordered to pay, roughly $1 million will go towards customer restitution; the rest of the fines are civil monetary penalties.
The Second Company Operating as a Crypto Hedge Fund to Get Taken Down this Year
This is the second time in recent months that a US regulator has targeted a company operating as a cryptocurrency hedge fund. Last month, the SEC issued a cease-and-desist order to a hedge fund called ‘Crypto Asset Management’ and its founder, Timothy Enneking.
At the time, the SEC alleged that although the fund had described itself at one point as the ‘first regulated crypto asset fund in the United States,’ it had never actually registered as an investment company.
These two cases may or may not be a part of ‘Operation Cryptosweep.’ The US SEC, CFTC, and a number of other financial regulators and law enforcement bodies in the North American Securities Administrators Association teamed up earlier this year under the Operation to eliminate fraud from the crypto space.