Bitcoin hedge fund fined $2.5m for operating Ponzi scheme

October 19, 2018
Chris Wheal

Hedge fund Gelfman Blueprint Inc (GBI) has been ordered by a New York federal court to pay fines of more than $2.5m for operating a fraudulent cryptocurrency investment scheme.

GBI fined and banned from trading after Ponzi scheme detected

GBI, an New York-based financial corporation, and its chief executive Nicholas Gelfman of Brooklyn were ordered to pay civil monetary penalties and restitution in what was the first anti-fraud enforcement action involving bitcoin filed by the Commodity Futures Trading Commission (CFTC).

Ponzi fraud

The court found that between 2014 and January 2016 the defendants and their officers, agents and employees operated a bitcoin Ponzi scheme in which they fraudulently solicited more than $600,000 from at least 80 customers.

Details of the CFTC investigation revealed customers’ funds were supposedly for placement in a pooled commodity fund that employed a high-frequency algorithmic trading strategy.

In fact, this was a fake and – as in all Ponzi schemes – payment of so-called profits were from previous investors’ misappropriated funds.

Trading ban

In addition to the $2.5m in customer restitution and civil penalties, the court ordered permanent trading and registration bans on GBI and Gelfman.

James McDonald, the CFTC’s director of enforcement, said: “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.”

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

Related News

OL DEX is closing all activities April 25, 2020
USDT (ERC-20) Gateway Enabled April 17, 2020