GAW Miners and Paycoin Head Josh Garza Pleads Guilty to Fraud
GAW Miners CEO Homero Joshua Garza has reportedly pleaded guilty to wire fraud in a deal to wrap up a criminal case brought by the SEC. Sentencing will take place at a hearing on 1st June after further interviews with victims.
It now seems likely that Garza will spend time in prison. Others who worked with Garza, including former GAW Miners CTO Joe Mordica and ZenMiner head Eric Capuano, were not charged.
The FBI sent letters to identified victims on 10th April assigning individual numbers and promising further updates:
Garza’s Long-Running Saga
The US Securities and Exchanges Commission (SEC) charged Garza with securities fraud and operating a ponzi scheme in December 2015. The charges stem from Garza’s involvement with GAW Miners — which includes failed cryptocurrency Paycoin, cloud mining site ZenCloud, exchange PayBase, and CoinSwap.
Today’s news refers only to that criminal case. Garza and GAW Miners are also the defendants in a civil suit dealing with the same incidents.
News of the plea was posted on the BitcoinTalk forum by user “Allen1980s”, who had been assisting the FBI and Department of Justice in their investigations.
The SEC’s 2015 complaint against Garza and his companies reads:
“Though cloaked in technological sophistication and jargon, defendants’ fraud was simple at its core – defendants sold what they did not own, and misrepresented the nature of what they were selling.”
Garza’s activities go back several years. However the SEC’s case specifically covers the period from August to December 2014, when the defendants took in about $19 million USD (mostly in bitcoin) from over 10,000 investors by selling cloud mining contracts called “Hashlets”. In reality, most Hashlets sold were not backed by any actual computing power.
GAW also allegedly operated a fraudulent mining pool called “ZenPool” which also never existed, but paid its premium subscribers from payouts from other cryptocurrency mining operations.
Paycoin, the $20 ‘Floor’ and Its Internet Army
Perhaps the most well-known of Garza’s projects, however, was Paycoin. Launched in 2014, it too was a multi-layered with several named concepts. It involved new digital wallets called “HashStakers” and Hashlet owners were invited to “upgrade” and hold Paycoin.
The SEC said HashStakers and Paycoin were attempts by GAW and Garza to prolong the ponzi scheme and prevent GAW Miners’ collapse.
Cryptocurrency enthusiasts from that period recall being hounded by passionate Paycoin proponents on online message boards. Any criticism or warning about GAW or its currency would draw a virtual army of defenders. On GAW’s own discussion forums, users were notified of any Paycoin mention. Seemingly cult-like, it was never clear if the messages came from actual stakeholders or sock puppet accounts — or both.
Though not mentioned in the SEC complaint, Garza also allegedly promised a $20 minimum price for Paycoin. However it was never clear how Paycoin (or any currency for that matter) could possibly make such a value guarantee without market manipulation.
There were also repeated hints that major retailers like Amazon were ready to accept Paycoin payments, which further fueled Paycoin’s hype and value.
The FBI and DOJ are currently seeking investors who lost money in GAW Miners’ operations, and will decide on a final sentence for Garza after further investigation.
Did you lose any money in GAW Miners or Paycoin? What are your thoughts on the matter? Let us know in the comments.
Images via GAW Miners