The CEO of a New York hedge fund has been charged with operating a Ponzi scheme that defrauded investors whom they had solicited to participate in a fund for trading Bitcoin.

The U.S. Commodity Futures Trading Commission said Nicholas Gelfman, chief executive of Gelfman Blueprint Inc. (GBI), raised about $600,000 from investors between 2014 and 2016 by promising customers a 7% to 9% monthly return on their Bitcoin trading after commission.

He allegedly represented that his fund would use a high-frequency, algorithmic trading strategy, executed by a computer program called “Jigsaw,” to trade the virtual currency electronically.

But according to a civil complaint filed on Thursday by the CFTC, the fund’s trading was “infrequent and unprofitable” and payouts of supposed profits to customers actually consisted of other customers’ misappropriated funds. Gelfman, who was also his firm’s head trader, allegedly staged a fake computer “hack” to conceal trading losses and the misappropriation.

The suit seeks restitution to defrauded pool participants and civil penalties, alleging investors lost nearly all of the $600,000 that Gelfman and his company, which was named as a co-defendant, solicited from them.

“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,” James McDonald, the CFTC’s director of enforcement, said in a news release.

As CoinJournal reports, “The rising use of bitcoin and other cryptocurrencies in the global marketplace has enticed fraudsters to lure investors into Ponzi and other similar schemes.” In June, the Securities and Exchange Commission won an $11 million default judgment against two cryptocurrency mining firms.

The CFTC said Gelfman operated his Ponzi scheme from at least January 2014 through at least January 2016, obtaining funds from at least 80 people. GBI’s Jigsaw trading account records, the commission said, “reveal trading on only 17 calendar days that incurred approximately 185 Bitcoin in losses.”

The supposed hack occurred in October 2015, with Gelfman allegedly telling customers it had caused GBI to lose all or nearly all of their investments.

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