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Bitcoin Hedge Fund and CEO Slapped With $2.5 Million Penalty for Ponzi Scheme
(Source: The Wall Street Journal)
A federal court ordered a New York trading firm to pay $2.5 million in fines and restitution for orchestrating a Ponzi scheme that defrauded at least 80 customers who thought they were investing in bitcoin. It’s the first Bitcoin-related fraud case for the Commodity Futures Trading Commission.
Gelfman Settled, More High-Profile Cases to Follow
In the settlement, Gelfman admitted to the charges against him and his firm and agreed not to appeal the decision by the Southern District of New York. Of the $2.5 million that Gelfman and GBI were ordered to pay, roughly $1 million will go towards customer restitution, while the rest of the fines are civil monetary penalties. However, the CFTC said Gelfman’s victims may not receive restitution because he doesn’t have sufficient funds.
The Gelfman case is the second time in recent months that a US regulator has targeted a company operating as a cryptocurrency hedge fund. Last month, the SEC issued a cease-and-desist order to a hedge fund called ‘Crypto Asset Management’ and its founder, Timothy Enneking, Finance Magnates reported.
In September 2017, the CFTC filed a suit with the U.S. District Court for the Northern District of Texas against two defendants for the allegedly fraudulent solicitation of BTC. According to CFTC’s release, the defendants were running two fraudulent businesses and misleading the public to invest in leveraged or margined foreign currency contracts, such as forex, binary options, and diamonds.