CFTC Charges New York Company with Operating Bitcoin Ponzi Scheme

The CFTC charged a New York-based company and its CEO with fraud for operating a "bitcoin Ponzi Scheme."

In a Complaint filed in the U.S. District Attorney's Office for the Southern District of New York, the CFTC alleged that Gelfman Blueprint, Inc. and Nicholas Gelfman (collectively, "Gelfman") solicited and received over $600,000 from investors to enter into contracts of sale for bitcoin through online trading platforms. In connection with the solicitation of investments, Gelfman allegedly misrepresented the performance of its algorithmic trading computer program – called "Jigsaw" – by claiming that it generated significant monthly profits while protected against risk presented by trading in bitcoin. The CFTC alleged that the Jigsaw trading program was actually used only for "infrequent and unprofitable trading." The CFTC claimed that Gelfman frequently made material misrepresentations related to monthly returns and other related indicators of success and security through social media, internet chat rooms and in-person conversations.

In addition, the CFTC alleged that Gelfman provided customers with fraudulent account statements and reports demonstrating fabricated trading activity and profits. The CFTC concluded that Gelfman misappropriated investor funds for personal enrichment and for other unauthorized uses and that Gelfman then claimed that investor funds were lost due to a hacking incident.

As a result of the alleged misconduct, the CFTC charged Gelfman with violating CEA Section 6(c)(1) and CFTC Rule 180.1. The CFTC seeks, among other things, restitution for the alleged victims of the scheme, disgorgement of profits, civil monetary penalties, and a ban on trading.