By Kyle James   |  09-21-2017   News
Photo credit: The Goldwater

While Bitcoin is still not widely accepted as an official currency, it is still the relatively new form of currency and it's not free from the risk of old-fashioned fraud. The U.S. Commodity Futures Trading Commission announced Thursday that it is suing a New York man and the company he owns over what they claim is a bitcoin Ponzi scheme. It is the first fraud suit in the agency's history involving bitcoin.

The CFTC is an independent agency that is responsible for monitoring U.S. derivatives markets and they claim Nicholas Gelfman from Brooklyn, New York ran a fund called Gelfman Blueprint Inc., which was used to primarily invest in bitcoin and "fraudulently solicited more than $600,000 from approximately 80 persons."

The CEO of Gelfman, and head trader at Gelfman Blueprint is said to have told investors that he ran a fund that "employed a high-frequency, algorithmic trading strategy," that never actually existed according to the CFTC.

The CFTC claims, "The purported performance reports were false, and – as in all Ponzi schemes – payouts of supposed profits … actuality consisted of other customers' misappropriated funds." The government also claims that Gelfman faked a computer hack in order to hide what was actually going on. Federal prosecutors say that because of Gelfman's scheme, investors ended up losing "most if not all of their invested funds."

The CFTC's director of enforcement, James McDonald, said: "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."

Gelfman did not respond or comment on the whole situation, but the case comes on the heels of a crackdown on bitcoin in China that shut down two of the country's largest bitcoin exchanges.

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Source: http://www.erienewsnow.com/story/36424665/us-government-sues-over-alleged-bitcoin-ponzi-scheme

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