Homero Josh Garza’s now-defunct companies must also pay $10 million.
Homero Josh Garza, who founded two cryptocurrency startups, GAW Miners and ZenMiner, has been ordered to pay a final civil judgment of $9.1 million, plus $700,000 in interest.
The judgement, which was formally approved by a federal judge in Connecticut on Tuesday, comes months after Garza pled guilty to a single criminal wire fraud charge. In May 2017, as part of the same lawsuit, Garza’s companies were hit with a default judgment of more than $10 million. No representatives made any formal response to the lawsuit—Garza himself invoked his Fifth Amendment privilege.
According to the civil complaint, which was first brought by the Securities and Exchange Commission in December 2015, Garza and his companies sold more than 10,000 “investment contracts representing shares in the profits they claimed would be generated from using their purported computing power to ‘mine’ for virtual currency.”
The judgment against Garza comes just days after the SEC also sued a New York man and his two companies that were allegedly involved in fraudulent initial coin offerings despite the fact that “neither has any real operations.”
In his plea deal, Garza admitted that his businesses were, in fact, an illegal pyramid scheme. In early 2014, GAW Miners was first introduced to the Bitcoin public as a reseller of mining rigs. Later, the company shifted to cloud-based mining (Hashlets) and, in early 2015, introduced its own altcoin, dubbed “Paycoin.” GAW also tried its hand at its own cloud-based wallet service (Paybase) and its own online discussion board (HashTalk).
In January 2015, Garza told Ars that he “started the company because of scammers.” He claimed that he first heard of Bitcoin around a year ago, at which point he tried to buy a hardware mining rig and “spent $100,000 for a product I never got.” Garza declined to say from which company he purchased the rig.
“I’d never had any experience with that—realizing a couple weeks later that these guys didn’t care how much money I can afford to lose,” Garza said. “I got really frustrated and thought we should start a company to try to fix this.”
Garza told Ars that GAW (“Geniuses At Work”) made “over $1 million in sales our first month,” adding that, within a few months, “We leveled at $60 million to $80 million per year.”
The purported entrepreneur, who did not immediately respond to Ars’ request for comment, is due to be sentenced in the criminal case on January 5, 2018 at 10:00am in Hartford, Connecticut, before US District Judge Robert N. Chatigny.
https://arstechnica.com/tech-policy/2017/10/bitcoin-fraudster-hit-with-9-1m-civil-judgment-on-top-of-criminal-guilty-plea/Summary: Josh Garza is being ordered to pay $10 million($9.1 million plus $700,000 interest). He admits his businesses were illegal pyramid schemes in his plea deal. Garza claims his businesses made "$60 million to $80 million per year".
This could be the first time I've seen someone be sentenced for running crypto pyramid schemes. Will this become more common as bitcoin gains prominence?
