A New York Federal Court in the southern district has ordered perpetrator of a crypto Ponzi scam to pay about 3 million dollars in restitution and penalty. This was also inclusive of a ban on the company’s operation.
The First Crypto Scam Case Filed By U.S. CFTC
The first case filed by the U.S. Commodity Futures Trading Commission (CFTC) against a crypto firm involved in a scam committed by Gelfman Blueprint, Inc. (GBI) and its CEO, Nicholas Gelfman. This case was filed in September 2017.
According to the order the firm, Gelfman blueprint, Inc., GBI operated between the year 2014 and 2016. During its period of operation, the officers, agents, and workers of the firm operated a bitcoin Ponzi scheme which involved fraudulently soliciting for over $600,000 from at least 80 customers. The funds were claimed to have been placed in a pooled commodity fund claimed to use a high-frequency, algorithmic trading strategy executed by a computer trading program called “Jigsaw.”
The strategy employed was noted to be false and the performance revealed to the public was also false. Like most Ponzi scheme, profit paid out to customers was customers’ misappropriated fund.
Also, Gelfmans losses and misappropriation were concealed through the providence of fake performance result to the pool participants, which was inclusive of statements that created the appearance of positive bitcoin trading gain in contrast to the reality. Further, a fake hack was staged that caused the loss of all the customer’s fund.
The Court Ruling and the CFTC’s Thought
The court ruling entails a permanent trading and registration ban on GBI. Also the firm was 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.
James McDonald, the CFTC’s Director of Enforcement, stated in the press release that the case marks another vital victory for the commission in the virtual currency arena. James also noted that as the string of cases shows, the CFTC is determined to identify bad actors in the virtual currency market and hold them accountable. Also, James stated that he is very grateful to the members of the enforcement virtual currency task force for their tireless work on this matter.
Meanwhile, CFTC cautions that the order requiring repayment of funds to victims may not result in the recovery of the lost money because the firm may not have sufficient fund or asset. However, CFTC is committed to combating fake and malicious acts in the cryptocurrency space.