The CFTC Cracks Down on Bitcoin Ponzi Scheme with over $2.5M in Penalties

On Thursday 18 October a New York Federal court ordered Gelfman Blueprint Inc (GBI) and its CEO Nicholas Gelfman to pay over $2.5 million in penalties after more than 80 customers were victims of fraud.

Gelfman Blueprint Inc said about themselves before the incident that they are a software development firm, currently offering customers access to a high-frequency BTC trading program called ‘Jigsaw’ (2% weekly BTC return). This news was released by the US Commodity Futures Trading Commission and is the the first anti-fraud enforcement action involving Bitcoin that they have filed.

The Scheme

Customers were promised a high return on their investments if they invested with Gelfman Blueprint, and claims of success were backed up with legitimate looking reports and figures that they distributed through their social media accounts. However, the scheme was fake, and any returns their customers did see were simply other customers funds redistributed to maintain the facade. Gelfman took the lie even further when they staged a hacking attack on their systems, claiming hackers were responsible for the loss of customer funds through theft.

Records indicate that from 2014 until January 2016 Gelfman Blueprint Inc fraudulently obtained over $600,000 from a minimum of 80 customers.

Breakdown of Financial Penalties to be Paid

  • Gelfman Blueprint Inc itself is required to pay $554,734.48 in restitution to customers
  • CEO Nicholas Gelfman is required to pay $492,064.53 in restitution to customers
  • Gelfman Blueprint Inc is required to pay $1,854,000 in civil monetary penalties
  • CEO Nicholas Gelfman is required to pay $177,501 in civil monetary penalties

In addition to the financial penalties, both GBI and Gelfman himself are banned permanently from trading and registration, as to be expected from a crime this serious. The CFTC encourages consumers to be cautious of their financial trading endeavors since it is not always easy to reclaim money from fraudulent companies who may lose the money.

Cryptocurrencies are still new and mysterious to a large proportion of the public, but many people recognize there is an important movement going on towards cryptocurrencies. This public excitement over the fastly advancing market can mean novice investors are keen to make the jump into cryptocurrencies, oftentimes offering their money to less than reputable companies and putting themselves at risk. Indeed, there are bound to be teething problems as the world moves a crypto-based model.

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