Bitcoin Hedge Fund and CEO Fined with 2-5 Million

Gelfman Blueprint, Inc. (GBI), along with Nicholas Gelfman who happens to be the CEO has been penalized by a federal court in New York and ordered to pay a sum of $2.5 million. Gelfman was found guilty of running a shady Ponzi scheme meant to defraud people. The announcement was published on October 18, 2018.

Gelfman Blueprint Inc. is a corporation that is based in New York and is also a hedge fund that runs on denominated Bitcoin (BTC). It was founded in 2014. By the time it was a year old, the hedge fund had about 85 clients and managed about 2,367 BTC.

In September 2017, the commodity futures trading commission in the United States had earlier filed an anti-fraud enforcement action against Gelfman Blueprint Inc. and this current order by the New York federal court is a continuation of the case.

Gelfman Blueprint Inc. was charged by the CFTC for setting up a Ponzi scheme which ran from 2014 to 2016 and deceived investors into believing that a computer algorithm referred to as JIGSAW had been developed by it. Jigsaw was claimed to enable investors to receive substantial returns on their investment via community fund. It was discovered, however, that the scheme was in totality a fraud.

Jigsaw was claimed to enable investors to receive substantial returns on their investment via community fund.

As at the time of the announcement, Gelfman Blueprint Inc. and its CEO, Nicholas Gelfman, had swindled more than $600,000 from customers. So far, the customer count is estimated to be at least 80 persons. Gelfman also hid the trading losses of the scheme by using a computer hack that was a fake and this ultimately led to almost all the funds of customers being lost.

In line with these findings, Gelfman Blueprint Inc. and its CEO, Nicholas Gelfman has been charged to make a payment of more than $2.5 million to be used as restitution and also as a civil penalty. The fines are to be paid as follows:

  • Gelfman Blueprint Inc.

$554,734.48 as restitution to defrauded customers
$1,854,000 as civil penalties.

  • Nicholas Gelfman(CEO)

$492,064.53 as restitution to defrauded customers
$177,501 as civil penalties.

The Director of Enforcement at the CFTC, James McDonald this was another successfully won battle for the CFTC in the enforcement arena of virtual currencies. He also stressed on the commitment and determination of the CFTC to fish out the bad guys in the markets that operate on virtual currency and ensure that they are held accountable

Just last month, two defendants who were alleged to have fraudulently solicited for bitcoins had a lawsuit filed against them by the CFTC. The lawsuit was filed at the Northern District of Texas’ District Court. As at the time of the lawsuit being filed, the defendants, by name, Kim Hecroft and also Morgan Hunt actually ran 2 businesses that were alleged to be fraudulent and also mislead members of the public to make investments in foreign currency contracts that were said to have been leveraged like forex, diamonds, and also binary options.

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