A Bitcoin Trading Firm And Its CEO Will Pay More Than $2,5 Million In Penalty For Ponzi Scheme

A Bitcoin Trading Firm And Its CEO Will Pay More Than $2,5 Million In Penalty For Ponzi Scheme

A New York Federal court has ordered the New York corporation Gelfman Blueprint Inc (GBI) and its CEO, Nicholas Gelfman of Brooklyn, to pay a total of $2,5 million in penalties because of fraud.

GBI is a New York-based company and Bitcoin hedge fund, incorporated 2014. By 2015 the corporation had 85 customers and well over 2,000 bitcoins under management. The news that arrived on October 18th is a continuation of the initial anti-fraud enforcement action filled in September 2017. GBI was back then charged for allegedly running a Ponzi scheme from 2014 to 2016, where investors could make a substantial amount of money through a fund. However, it was all a lie, and GBI stole over $600,000 from at least 80 customers.

“… supposedly for placement in a pooled commodity fund that purportedly employed a high-frequency, algorithmic trading strategy, executed by Defendants’ computer trading program called “Jigsaw.” In fact, as charged in the CFTC Complaint, the strategy was fake.”

The current order states that Gelfman Brooklyn needs to pay over $2,5 million in civil monetary penalties and restitution in what was the first anti-fraud enforcement action involving Bitcoin filed by the Commodity Futures Trading Commission. James McDonald, the CFTC’s Director of Enforcement, commented:

“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.”

GBI and Gelfman are ordered to pay $554,734.48 and $492,064.53 in restitution to customers and $1,854,000 and $177,501 in civil monetary penalties, respectively.

Even though this is a victory against fraud, many wants cryptocurrencies more regulated. The former CFTC chairman, Gary Gensler, claims that crypto needs more regulation than other commodities. Gensler, who has chaired the CFTC from 2009 to 2014, also added that “cryptocurrencies like Bitcoin need more protection and probably more protection than even the oil markets or corn and wheat.“ However, he has chosen to remain neutral on the regulatory scope, declining to choose which agency, SEC or CFTC, should be in charge of regulating digital currencies.

Mr Gensler believes that some forms of regulation are compulsory, giving the analogy that, “you want traffic lights and speed limits because then the public is confident to drive on the roads, in this case, the crypto roads.”

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