Bitcoin

US Federal Court Fines Bitcoin Ponzi Schemer Over $2.5 Million

from The Bitcoin News 5 years ago 0 0 782

The U.S. Commodity Futures Trading Commission (CFTC) announced on Thursday that a New York federal court has ordered two defendants “to pay in total over $2.5 million in civil monetary penalties and restitution” in a bitcoin fraud case.

The derivatives watchdog explained that “Gelfman was liable as a controlling person for Gbi’s violations” while “Gbi was liable as a principal for the violations of Gelfman and its other officers, agents, and employees.”

Noting that the complaint was originally filed against the defendants on Sept. 21, the CFTC wrote in Thursday’s announcement:

In addition to requiring Gbi and Gelfman, respectively, to pay $554,734.48 and $492,064.53 in restitution to customers and $1,854,000 and $177,501 in civil monetary penalties, the orders impose permanent trading and registration bans on Gbi and Gelfman.

The orders also “permanently enjoin them from further violations” of the CFTC Act and regulations. While the defendants are required to repay victims, the agency emphasized that the orders “may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets.”

From approximately 2014 to January 2016, “Gelfman and Gbi, by and through its officers and agents and employees, operated a bitcoin Ponzi scheme,” the CFTC wrote. “They fraudulently solicited more than $600,000 from at least 80 customers.”

However, the commission asserted:

The strategy was fake, the purported performance reports were false, and — as in all Ponzi schemes — payouts of supposed profits to Gbi Customers in actuality consisted of other customers’ misappropriated funds.

Gelfman, in order to conceal the scheme’s trading losses and misappropriation, staged a fake computer ‘hack’ that supposedly caused the loss of nearly all customer funds.

What do you think of this CFTC’s enforcement action against Gbi and its CEO? Let us know in the comments section below.

Images courtesy of Shutterstock.

Need to calculate your bitcoin holdings? Check our tools section.

The post US Federal Court Fines Bitcoin Ponzi Schemer Over $2.5 Million appeared first on Bitcoin News.