GBI is a denominated Bitcoin hedge fund, based in New York. It has been in operation since 2014. Based on the company’s website information, by 2015 the hedge fund had over 85 clients and managed 2, 367 BTC.
The sanction order is a follow-up on the initial anti-fraud actions by the U.S. Commodity Futures Trading Commission (CTFC) filed against GBI in September 2017. The commission accused GBI of running a Ponzi scheme from 2014 to 2016. The company told its investors they had developed a specialized algorithm – “Jigsaw,” allowing large returns through a commodity fund. The investigation proved GBI’s actions are fraudulent.
Investigators found out that GBI and Gelfman have solicited over $650,000 from 80 users. To cover up their trials, Gelfman and his team have deployed a fake computer “virus.” The scheme managed to “suck” almost all user funds.
The federal court ordered GBI and Gelfman to pay more than $2,5 million in restitution and monetary penalties. GBI and its CEO have to pay $554,734.48 and $492,064.53 in the form of restitution to GBI users and $1,854,000 and $177,501 in monetary fines, respectively.
CTFC’s Director of Enforcement James McDonald stated that “such cases mark yet another job well done for the Commission in the digital assets and cryptocurrencies realm. The CTFC is willing to uncover all fraudulent persons and companies and accuse them based on the laws.”
In September, the CTFC filed a lawsuit, in cooperation with the U.S. District Court for the Northern District of Texas. Accusations are against two individuals who allegedly solicited BTC. Defendants Morgan Hunt and Kim Hecroft were in the operation of two fraudulent ventures. They have lured their customers into leveraged and margined contracts, such as Forex, Diamonds, and Binary.