CFTC, Bitcoin scammer clash over invoking Fifth Amendment privileges

Maria Nikolova

The Commission is worried that Nicholas Gelfman, accused of running a Bitcoin Ponzi scheme, may use the Fifth Amendment privilege in a way dictated by whim or self-interest.

The United States Commodity Futures Trading Commission (CFTC) is seeking more clarity on whether a defendant in a virtual currency scam case waived his Fifth Amendment privilege against self-incrimination. The case, captioned Commodity Futures Trading Commission v. Gelfman et al (1:17-cv-07181), targets Nicholas Gelfman, of Brooklyn, New York, and Gelfman Blueprint, Inc. (GBI), a New York corporation.

The Complaint in this matter was filed on September 21, 2017, alleging a Ponzi scheme involving the virtual currency Bitcoin and at least 80 customers, defrauded of at least $600,000.

On October 12, 2017, Gelfman, proceeding “pro se”, submitted a Verified Answer to the Complaint. Back then, he did not invoke his Fifth Amendment privilege and executed the Verified Answer “under penalty of perjury.”

On March 7, during a meet-and-confer call concerning Gelfmn’s noticed deposition, he suddenly indicated that he expected to invoke his Fifth Amendment privilege against compelled self-incrimination at the deposition and would decline to answer some but not all questions that may be asked at his deposition. On March 14, during a further meet-and-confer call, Gelfman indicated he would not answer certain questions concerning the subject matter of his Verified Answer on the basis of that privilege.

The CFTC argues that Gelfman waived his privilege against self-incrimination with regard to matters relevant to his Verified Answer when he filed his Verified Answer under penalty of perjury. The regulator notes that an individual may not use the Fifth Amendment as both a shield and a sword, answering some questions related to a particular topic in a given proceeding and avoiding others, as dictated by whim or self-interest. That is why, the CFTC is asking for more clarity on the matter.

Let’s note that in his Verified Answer, the defendant denied the bulk of CFTC’s allegations against him, including that he had run a Bitcoin Ponzi scheme and that he fraudulently solicited more than $600,000 from investors.

In his Verified Answer, Gelfman also denied that Bitcoin and other virtual currencies are commodities. This negation can be seen often in virtual currency scam cases, as this is an effort to question the CFTC jurisdiction over the segment. Whereas the defendants in such cases usually argue that virtual currencies are not commodities, the CFTC argues that they are, so that it can establish its rule over the segment and, hence, that it is the regulator that has the right to take enforcement action against virtual currency scams.

Earlier this month, Judge Jack B. Weinstein of the New York Eastern District Court agreed with the the CFTC and Chicago Mercantile Exchange Inc that virtual currencies are commodities under the Commodity Exchange Act (CEA). The ruling was a part of proceedings against Patrick K. McDonnell and CabbageTech, Corp. doing business as Coin Drop Markets (CDM). The defendants are charged with fraud and misappropriation in connection with purchases and trading of Bitcoin and Litecoin.

The CFTC has made it clear that it intends to use this ruling to support its action against other fraudulent cryptocurrency schemes, such as the case against My Big Coin Pay.

The Fifth Amendment of the U.S. Constitution provides that:

“No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury, except in cases arising in the land or naval forces, or in the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.”

Read this next

Metaverse Gaming NFT

Dubai Museum taps Binance to jump onto NFT bandwagon

Dubai’s Museum of the Future, the $136 million UAE government-sponsored museum that opened a few weeks ago, is joining forces with Binance NFT to roll out a range of digital products on blockchain.

Digital Assets

Ripple and Lithuanian FINCI partner for XRP-based payments

Ripple is looking to expand its presence in Europe, forming a new partnership with Lithuanian electronic money institution FINCI.

Digital Assets

Crypto.com enables Shopify merchants to accept crypto payments

Crypto.com has integrated with Canadian e-commerce giant Shopify so global merchants can accept crypto payments and save on processing fees through cash-final settlements.

Institutional FX

FX volume drops 13pct at CLS Group in April 2022

FX settlement specialist CLS Group today reported that the executed volumes of currency trading on its platforms were notably down in April.

Crypto Insider, Opinion

Regulation: The Gold-Standard for Crypto-Assets

When the US supervisory authority SEC allowed an investment product referencing Bitcoin futures to be traded for the first time last October, this was widely perceived as a signal that cryptocurrencies had finally become established as an asset class.

Executive Moves

Solid hires FX industry veteran Darren Barker for multi-bank ECN’s business development

His curriculum vitae includes former roles at Cantor Fitzgerald, Sucden Financial, R.J. O’Brien, Jefferies, Natixis, Unicredit, J.P. Morgan, Raiffeisen, RBS International, UBS, Deutsche Bank, and Citi. 

Inside View

Mihails Safro, xpate CEO: Tips sellers need to know to overcome compliance obstacles

The unprecedented growth of e-commerce changed shopping dramatically last year. Many sellers suddenly faced a rapidly growing number of customers who had to stay home during the lockdown. When some clients adopted Netflix and Spotify as part of a daily routine, others ventured into online business. Robinhood alone saw a whopping 6 million rise in user numbers in 2 months. 

Institutional FX

BMLL delivers Level 3 data to Kepler Cheuvreux for order book analytics and algo performance

The solution covers more than 6.5 years of harmonised historical data from 65 venues and combines it with easy to use APIs and analytics libraries in a secure cloud environment. 

Digital Assets

Crypto Is An Invaluable Tool In The Fight Against Financial Oppression  

Crypto has proven itself to be much more than just a hot investment. Indeed, some say it’s poised to play a critical role in the future of finance

<