For the first time, the US Commodity Futures Trading Commission (CFTC) anti-fraud enforcement action work has led to a company been fined for its involvement in relating to Bitcoin. The case against New York investment firm Gelfman Blueprint was filed in the U.S. District Court for the Southern District of New York on 21st September 2017.
In court, the CFTC was able to provide enough evidence to help deliver judgment against Gelfman Blueprint Inc. allegations in the Bitcoin Ponzi Scheme. As seen from the reports tabled in court the accused fleeced over 80 people and were able to get more than $600,000. According to the press release the funds were placed in pooled commodity fund that was used to employ a pooled commodity fund that purportedly employed a high-frequency, algorithmic trading strategy executed by Jigsaw Gelfman computer trading program.
At the centre of it all was Nicholas Gelfman who was the GBI CEO at the time the operation was live. The scheme was outstared from 2014 to January 2016. In a bid to cover their tracks Gelfamn used funds from other sources to pay the customers as profits. The funds paid out as profits are believed to be from misappropriated funds from customers. Moreover, to hide their tracks Gelfman and GBI gave customers fake performance tracks. Furthermore as a way of hiding the massive loss of money Gelfman organized a purported computer hack which led to more losses. Instead of the hack helping him hide his track it led to nearly all customer’s funds getting lost.
Break Down of Fines
While delivering his final judgment judge, P. Kevin Castel from the U.S. District Court for the Southern District of New York ordered the defendants to pay fines amounting to $2.5 million. GIB and Gelfman were ordered to pay $177,501 and a further $1,854,000 as civil monetary fine. On the order hand as customer compensation, Gelfman and GBI were ordered to pay $492,064.53 and $554,734.48 respectively. Besides the monetary fines, GBI and Gulfman were slapped with a permanent trading and registration ban.
While commenting on the final judgment, CFTC Director of Enforcement James McDonald said;-
‘I’m forever grateful to all of our Enforcement’s Virtual Currency Task Force staff who worked diligently to ensure the masterminds of the Ponzi scheme are brought to justice. As this case shows, we at the CFTC are determined to smoke out the bad sectors in the cryptocurrency market and get them charged for violating the law. This case is yet another victory for the CFTC.”