First CFTC Bitcoin Fraud Case Ends With $2.5M Fine for Ponzi Scheme

Nicholas Gelfman claimed to have a high-frequency trading computer program that could mine profits from Bitcoin, saying that his clients typically earned “7-11% monthly return on their Bitcoins.” He collected more than $600,000 from at least 80 eager investors from 2014 to 2016.

The only problem? Gelfman and his Staten Island-based Gelfman Blueprint Inc. presented fake performance reports to investors and paid some of them using other investors’ money—the hallmark of a Ponzi scheme.

Now Gelfman and his firm have been ordered to pay fines and restitution totaling $2.5 million, according to a release by the Commodity Futures Trading Commission. It’s the first Bitcoin-related fraud case for the CFTC.

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. The CFTC said Gelfman’s victims may not receive…