Bitcoin Hedge Fund and CEO Slapped With $2.5 Million Penalty for Ponzi Scheme

A New York federal court has purchased cryptocurrency hedge fund Gelfman Blueprint, Inc. (GBI) and its CEO Nicholas Gelfman to pay back around $2.5 million for working a fraudulent Ponzi plan, according to an formal announcement printed Oct. 18.

GBI is a New York-centered company and denominated Bitcoin (BTC) hedge fund integrated in 2014. As mentioned on the company’s web page, by 2015 it experienced 85 clients and 2,367 BTC below management.

The get is the continuation of the preliminary anti-fraud enforcement motion filed by the U.S. Commodity Futures Buying and selling Commission (CFTC) towards GBI in September 2017. The CFTC charged GBI for allegedly managing a Ponzi plan from 2014 to 2016, telling investors that it had developed a personal computer algorithm called “Jigsaw” which authorized for significant returns by way of a commodity fund. In truth, the full plan was a fraud.

For each the announcement, GBI and Gelfman fraudulently solicited about $600,000 from at least 80 shoppers. In addition, Gelfman established up a bogus computer system “hack” to conceal the scheme’s trading losses. It sooner or later resulted in the decline of virtually all client funds.

The present-day buy expenses GBI and Gelfman to pay out more than $2.5 million in civil monetary penalties and restitution. GBI and Gelfman are purchased to fork out $554,734.48 and $492,064.53 in restitution to clients and $1,854,000 and $177,501 in civil monetary penalties, respectively.

James McDonald, the CFTC’s Director of Enforcement, claimed that “this case marks nevertheless an additional victory for the Commission in the virtual forex enforcement arena. As this string of situations exhibits, the CFTC is identified to recognize terrible actors in these digital forex marketplaces and keep them accountable.”

Previous month, the CFTC filed a accommodate with the U.S. District Courtroom for the Northern District of Texas against two defendants for the allegedly fraudulent solicitation of BTC. For each the accommodate, defendants Morgan Hunt and Kim Hecroft ended up jogging two fraudulent businesses and misleading the community to make investments in leveraged or margined international currency contracts, these kinds of as forex, binary possibilities, and diamonds.

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