The U.S. Commodity Futures Trading Commission (CFTC) has filed a lawsuit against a New York-based man and his company for allegedly running a bitcoin-based Ponzi scheme.
Nicholas Gelfman and his firm, Gelfman Blueprint Inc (GBI), are accused of procuring over $600,000 from 80 people between January 2014 and approximately January 2016.
According to the CFTC, the funds were solicited from customers under the pretence of sponsoring a high-frequency bitcoin trading algorithm called "Jigsaw." Legal documents state that GBI falsely claimed that, through their investment, customers could enjoy a 7–9 percent monthly increase in bitcoin.
However, the CFTC summarises that:
While GBI reportedly advertised itself as the "world’s largest and most advanced cryptocurrencies exchange," the company's bitcoin address allegedly shows "no bitcoin trading activity at all after early July 2015, and a bitcoin balance of zero beginning in early August 2015."
Gelfman allegedly tried to conceal the Ponzi scheme by claiming the company had been hacked, and that all customer funds had been stolen as a result.
Speaking in a release on the agency's website, James McDonald, the CFTC's Director of Enforcement, stated that, as part of its commitment to fintech innovation, the watchdog must pay careful attention to scammers misusing bitcoin.
McDonald said of the GBI case: "As alleged, 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."
He added that the CFTC will continue to "work hard to identify and remove bad actors from these markets."
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