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Josh Garza Sentenced to Prison and Fined $9M over GAW & Paycoin Scam – Bitcoin News

U.S. Attorney’s Office District of Connecticut has announced Homero Joshua Garza (Josh Garza) has been sentenced to “21 months of imprisonment, followed by three years of supervised release, the first six months of which [Mr. Garza] must spend in home confinement, for his role in his companies’ purported generation and sale of virtual currency.” The so-called stablecoin founder was also ordered to pay restitution of more than $9 million. After sentencing, he was released on bond, having been also ordered to report for incarceration at the start of next year.

Also read: Mt. Gox Victims Must Take Claims to Tokyo, Not US, Judge Rules

Josh Garza Is Finally Sentenced, 21 Months in Prison, $9 Million Fine

Slightly more than four years ago, nearly a lifetime in the crypto space, Mr. Garza, 33, is alleged, over an eight-month period, to have “through GAW, GAW Miners, Zen Miner, and Zen Cloud, companies he founded and operated, defrauded victims out of money in connection with the procurement of virtual currency on their behalf,” according to a press release from the US Attorney from Connecticut.

GAW/Paycoin 2014 Scam: Josh Garza Sentenced to 21mos Prison, $9M Fine
Mr. Garza during better times.

Mr. Garza and cohorts were involved in selling miners, access to them, and an alternative cryptocurrency called Paycoin, described as one of the first stablecoins, along with what were known as hashlets. According to the complaint, subsequent indictment, and eventual conviction, a hashlet “entitled an investor to a share of the profits that GAW Miners or Zen Miner would purportedly earn by mining virtual currencies using the computers that were maintained in their data centers. In other words, hashlet customers, or investors, were buying the rights to profit from a slice of the computing power owned by GAW Miners and Zen Miner.”

He was also alleged to have made false promises to potential and real investors, including “that GAW Miners’ parent company purchased a controlling stake in Zen Miner for $8 million and that Zen Miner became a division of GAW Miners,” prosecutors maintain. He pushed hashlets, a kind of early cloud mining, which the government claims was fraudulent. His “companies sold more hashlets than was supported by the computing power maintained in their data centers.”

Josh Garza Imprisoned and Fined $9M over GAW Paycoin Scam
Even at its peak, Paycoin failed to maintain its promised $20 peg, reaching a peak of $15.92.

An Early Crypto Ponzi

Then there were the alleged pump and dump schemes. According to authorities, he “also stated that the market value of a single Pay Coin would not fall below $20 per unit because [his businesses] had a reserve of $100 million that the companies would use to purchase Paycoins to drive up its price. In fact, no such reserve existed.”

All of it turned out to a be a classic Ponzi, whereby Mr. Garza is alleged to have taken money from one company to prop up another, essentially borrowing from newer investors while trying to keep older ones from getting too concerned. “The payments were money that the companies owed the older investors based on the purported mining GAW Miners and Zen Miner had done on the investors’ behalf. Through this scheme,” the government charges, he “defrauded hundreds of individuals around the world of a total of $9,182,000. Judge Chatigny ordered [Mr. Garza] to pay restitution in the equivalent amount.”

Josh Garza Sentenced to Prison and Fined $9M over GAW & Paycoin Scam
Mainstream media and go-to pundits such as Mr. Casey were often unwitting cheerleaders of scams (thanks to Jamie Redman for source and graphic).

It was one of the very first US crypto crime cases, involving multiple law enforcement and regulatory agencies from the Federal Bureau of Investigation to the Securities and Exchange Commission (SEC), and the US Department of Justice. Summer of last year, Mr. Garza struck a plea deal with authorities over criminal matters. A suit by the SEC remains ongoing, however, and could very well dampen things for Mr. Garza even further.

Was justice served in the Garza case? Let us know in the comments section below.


Images courtesy of Shutterstock and Coinmarketcap.


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Tags in this story
alternative coin, Crime, Cryptocurrency, Federal Bureau of Investigation, Fraud, gaw, GAW Miners, hashlet, Homero Joshua Garza, mining, N-Featured, Pay Coin, Ponzi, pump and dump, Scam, Securities and Exchange Commission, U.S. Attorney’s Office District of Connecticut, U.S. District Judge Robert N. Chatigny, US Department of Justice, Zen Miner

Source: Josh Garza Sentenced to Prison and Fined $9M over GAW & Paycoin Scam – Bitcoin News

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Tokyo Police Shuts Down Cryptocurrency Pyramid Scam, Arrests 8 Men – Scott Jeffrey

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When investing in cryptocurrency it’s extremely important to be mindful of various scams that you could be targeted for. There are a number of individuals that are working to create scams that con people out of Bitcoins and other cryptocurrency. Because it’s quite easy to transfer crypto and because it could be difficult to receive a refund on cryptocurrency, it can be one of the perfect tools for the creation of financial scams.

A recent cryptocurrency pyramid scheme was highly successful in targeting around 6000 people internationally from a hub in Tokyo. Eight men were arrested and charged with stealing roughly $68.42 million in various cryptocurrencies.

The company that they were associated with was called Sener and they claimed to be an official United States investment firm. The company that they created was unregistered and they were collecting cryptocurrency from people to have it then reinvested at several levels of membership status. The group held a series of seminars and gatherings promising monthly returns of roughly 20% on any of the money invested through their system. Customers could receive a referral bonus for bringing in new investors to the system.

The company that they created was widely successful through their seminars as well as through a series of YouTube videos that were published on the subject of cyptocurrency investment with them. The group was able to work unimpeded over several months without for filling their promise and while operating illegally without registration.

Their practices would have continued if a lawsuit was not properly filed against them. A group of 73 of their members stepped forward to create a lawsuit in the Tokyo District Court. This group of individuals is seeking ¥370 million in damages for the funds that were taken from them in the illegal operation of this business.

There are a number of other members that bought into this company that have still yet to come forward or request any type of compensation for the scheme.

As news continues to spread about Sener, more of their victims are coming forward in an effort to seek damages. Because the company was not operating with a proper securities license it’s also quite possible that they will be unable to continue their operations in the United States as well as several other international locations.

When you are considering an investment in cryptocurrency or having your currency managed for investment is important to consider the validity of a company and its structure. If you are starting to see that there are levels of membership, ongoing referrals and an overall lack of publication on a company, this could represent a risky choice for your investment.

Asking the right questions such as whether a company is properly registered for the trade of securities can also help to make sure that they aren’t forcibly shut down in a hurry for operating illegally and that your money can remain safe in their hands.

 

 

 

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