Commodity Futures Trading Commission Files First Bitcoin Suit

Crime, FinTech, Investing, News | September 22, 2017 By:

In its first suit involving bitcoin, the US Commodity Futures Trading Commission (CFTC) is suing an individual and his company over an alleged bitcoin Ponzi scheme in the derivatives market.

The CFTC claims that Nicholas Gelfman of Brooklyn, New York and his cryptocurrency fund Gelfman Blueprint, Inc. “fraudulently solicited more than $600,000 from approximately 80 persons.” Gelfman servers as CEO and head trader at the company and the suit claims he told investors that he ran a fund that “employed a high-frequency, algorithmic trading strategy.”
That doesn’t exist, the CFTC claims. “The purported performance reports were false, and — as in all Ponzi schemes — payouts of supposed profits … actuality consisted of other customers’ misappropriated funds,” the CFTC said. Gelfman tried to cover-up the issue by staging a computer hack, the agency claims.

Federal prosecutors say that investors ended up losing “most, if not all, of their invested funds. “The Defendants here preyed on customers interested in virtual currency, promising them the opportunity to invest in Bitcoin when in reality they only bought into the Defendants’ Ponzi scheme,” said a statement from James McDonald, the CFTC’s director of enforcement.

Gelfman did not immediately respond to a request for comment.