The ex-CEO of Gaw Miners, a cryptocurrency mining company, was sentenced to prison for defrauding investors via a Ponzi scheme.
Just like any other financial industry, the cryptocurrency ecosystem has plenty of con artists and scammers looking to make money from gullible people. One of the most notorious was BitConnect, which finally saw the last reputable exchange delist its coin. Another scam was run by Homero Joshua Garza, the ex-CEO of Gaw Miners, and he just received a 21-month prison sentence for his crimes.
Cryptocurrency Mining Scam
Garza ran Gaw Miners, a cryptocurrency mining company that sold “hashlets” to investors. Under the company’s plan, individuals could buy the rights to profits generated by Gaw Miner’s crypto mining operation.
However, the entire setup was a lie. The company never had the actual computing power that they promised investors. The operation ran as a Ponzi scheme wherein money from new investors was used to pay off older investors. Overall, people sank $9.2 million into this crypto black hole.
Gaw Miners lied on several fronts to their investors. They told their investors that the company’s native cryptocurrency, the PayCoin (XPY), would have a floor price of $20. This floor was backed by the company’s claim that they had $100 million in reserve that would be used to keep the price up. Needless to say, Gaw Miners did not have the funds. PayCoin never reached $20. It only got as high as $15.92 on December 22nd, 2014. It is currently trading for $0.013108.
Another lie was that the company had purchased an $8 million stake in ZenMiner, a cloud-mining company. Eventually, the FBI investigated Gaw Miners, and the U.S. Attorney for Connecticut brought Garza to court.
Sentence Handed Down
Garza pleaded guilty to wire fraud back in July, and he faced 20 years in prison. However, the scammer isn’t going to do such hard time.
The judge sentenced Garza to 21 months in prison for his crimes. Once the current 32-year-old convict is released in 2021, he’ll have three years of supervised release, which includes six months of home arrest. Garza will also have to pay back the $9.2 million he stole from investors.
This payback is in addition to a $9.9 million civil judgment against Garza from last year. Both Gaw Miners and ZenMiner were also ordered to pay $11.4 million each for their role in the Ponzi scheme as part of the civil lawsuit.
It’s amazing to think how much money was scammed in such a short time. Gaw Miners was only operational for nine months but managed to fleece $9.2 million during that time. Such scams should always remind potential investors to do due diligence when considering sinking money into a project.
Do you think Garza got the right sentence? Should he be in jail for a longer time? Let us know in the comments below.
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