NYC crypto scammer fined with $2.5 million

After cryptocurrencies became so popular, it is no wonder that they started attracting so many scammers. Every industry that is starting to feature a lot of customers always attracts someone who wants to make quick and easy money. Pretty much every industry has seen a scammer, but in the case of cryptocurrencies, their decentralized and unregulated nature makes it, even more, easier for an individual to conduct a Ponzi scheme.

 A Scam in NYC

A new such scheme has been unearthed by the CFTC in New York. One of its residents has reportedly been fined $2.5 million because of his illegal activity and alleged Ponzi scheme that solicited at least $600,000. In the case of not paying the fine, the man may be facing jail time. The culprit is actually named Nicholas Gelfman, who had created a corporation by the name of Gelfman Blueprint, Inc. According to reports from the CFTC, the scheme was masked as a Bitcoin hedge fund and claimed to work on an algorithm that enabled high-frequency trading.

The Algorithm

The corporation actually referred to it as “Jigsaw”, but later it was found out that nothing resembling a high frequency enabling algorithm was being used to service investors. In reality, nothing special was being done, thus soliciting the fine that the company received. The defendants managed to fool their investors, making them believe that they were making steady gains on their investments, while in reality they were just being shown different account statistics.

The Verdict

However, their activity was thoroughly investigated and it was found out that the defendants were funneling a couple of thousands of dollars to make the gains seem true when in reality the majority of their trades were unprofitable. Not only was this the only illegal activity from the corporation, but they are also accused of staging a fake hacking attack, in which most of the crypto capital was lost. Not only will the company have to pay the fines, but they will actually have to close down and never be able to open up with the same industry ever again. According to the court’s decision, after the financial penalties are paid, the company will receive a permanent registration and trading ban.

The discovery of this Ponzi scheme was one of the biggest successes for the CFTC. The Director of Enforcement James McDonald mentioned that the frequency at which the commission is being able to tackle the digital currency scams is amazing. Should they keep up the pace, there will be a lot fewer scams not only being able to hide from the watchful eye but appearing as well.

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Konstantin Rabin

About the Author: Konstantin Rabin

Konstantin has been working in the financial services industry since 2011. He is over-viewing various updates in the technology, regulation, and market movements. He's passionate about games and has a cute cat named Dog.

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