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Author Topic: SEC charges Joshua Garza for conducting a Ponzi scheme and defrauding investors  (Read 2258 times)
mayax
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December 02, 2015, 01:35:23 AM
 #21

Nothing new. The whole Bitcoin market is full of similar "businesses".

Even the big exchange companies are making the same; fake bots, fake transactions, cheating clients in this way. Any reaction? None. Smiley


"Joshua Garza" is just a name from many. Bitstamp, Bitfinex, Huobi, BTC China, Okcoin and so on are cheating customers daily by faking their transactions volume and misrepresenting the nature of what they were selling (fake volum, fake data, fake price, market manipulation).  Smiley
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December 02, 2015, 01:40:31 AM
 #22

I hope that is only start, there is too much scammers in Bitcoin and altcoin scene. They are one of main reasons we still dig our way to mainstream.
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December 02, 2015, 02:08:20 AM
 #23

I hope that is only start, there is too much scammers in Bitcoin and altcoin scene. They are one of main reasons we still dig our way to mainstream.

without scams, there is NO BTC Smiley

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December 02, 2015, 02:24:34 AM
 #24

It's a good thing some actions is being taken.

Scammers think they can do everything. Well look here. not only jail time, but your name is corrupted forever
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December 02, 2015, 02:34:02 AM
 #25

Before anyone get too happy about Josh Garza-Karperles

This is a civil action only.

Sure, they will grab his money if they can find it

But he will serve no jail time.



~BCX~
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December 02, 2015, 02:44:33 AM
 #26

This guy is really a scum bag. Stealing so much money and pretend to be innocent. Achh. It makes me sick.

Let's hope he will get some nice prison buddies.

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December 02, 2015, 02:53:59 AM
 #27

Good thing that he finally gets what he deserves to get. It's quite saddening that people who lost so much in this scam fell for it. GAW SEEMED TO BE legit at first, well after a few months they fucked it over for the money.

No he doesnt get what he deserves.

What he deserves is a life time of ass raping.

Frankly if you know how the system works, SEC just cares about fines which would actually be taken from the victims as SEC is government body who always gets first dip in any credit payback
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December 02, 2015, 02:57:56 AM
 #28

Good thing that he finally gets what he deserves to get. It's quite saddening that people who lost so much in this scam fell for it. GAW SEEMED TO BE legit at first, well after a few months they fucked it over for the money.

Yeah I don't undertstandy why they blame the investors. It was NOT an altcoin just a legimate business doing some new.

There is no blame and shame investing in a company likethis and having this kind of innovated/elevated product.

You must be dumb as fuck or you just spill out what you dont know.

Have you actually followed the GAW fiasco?

These so called "investors" are either blinded by greed or in the ponzi themselves.

If i promised you a bridge in brooklyn as a payout of your investment to me, would you consider yourself an investor or gambler?

I can smell paycoin a scam miles away right when it was introduced. GAWminers "customers" could have always dumped every thing right then and got most of their money back. Reality is idiots are too greedy.
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December 02, 2015, 03:29:38 AM
 #29

Okay, I am confused and admittedly don't know the history of this firm or its activities.

I am currently on page 15 of 23 of the actual SEC complaint and so far, there a few "wild cards" that are like damn, if this guy did that he is toast....

However... !!!! When reading the actual statement of facts in the complaint, which spell out claims the SEC it so far appears to me that the SEC is failing to substantiate the claims it made in the first few pages of the complaint, almost to the point the snippets in the news articles on the complaint are "sensationalist" claims being made by the SEC.

To be fair, I don't know any of the facts, but from the actual complaint itself I get the feeling these charges are being beefed up.

I take it from the comments on this post that the company in question went belly up. That does not mean there was a deliberate attempt at a ponzi scheme, but again I don't know all the facts. However, the accusations in the compliant, thus far aren't being substantiated well and if this guy did do in fact what he is being accused of Defense counsel is going to have a field day ripping apart the claims being brought forth because so far, and I am not all the way through, many of them seem bogus and sensationalized.

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December 02, 2015, 03:49:53 AM
 #30

haha!  nice to see faggots like Josh Garza and Mark Karpeles getting what they deserve.


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December 02, 2015, 04:02:23 AM
 #31

For example, in the beginning of the complaint it certainly paints a picture that the company in question had little or no mining capacity.

The complaint uses prejudicial adverbs and adjectives to persuade the reader such as:

Quote
that defendants purportedly devoted to virtual currency mining. In reality, defendants sold far more Hashlets worth of computing power than they actually had in their computing centers. There was no computer equipment to back up the vast majority of Hashlets that defendants sold.

I certainly read and other claims at the beginning of the claims, especially in regard to the ponzi accusation, and come to the conclusion that the charges are the company was just outright selling mining contracts for non-existent hardware "mining power" and in turn using those sales from new customers to pay off the "fake mining reward"

The sensationalist continues:

Quote
As a result of dramatically overselling their computing capacity,

However, digging into the details that's not the case. The company did have mining power. And it's first week of sales (in August) 3-4 times more bitcoin hashing power was sold than the company actually owned:

Quote
48. During their first week of availability alone, GAW Miners and ZenMiner oversold -- between triple and quadruple -- the number of Hashlets for which they had the supporting computing power. Yet, their sales continued. 49.

Note Alt coins were not mentioned above and if there were fraudulent Alt coin mining sales it sure would be mentioned.

So 3-4x oversale? That's not dramatic... no problem. Order my asic miners and voila... the contract paid for the hardware (or will pay).

For example, If Microsoft or Amazon suddenly sold 3-4x more hard drive space for cloud storage than they physically owned would that be fraud? Certainly not if the increased storage capacity to meet the storage needs in there data centers...

Continuing...

Quote
49. By October 2014, GAW Miners had oversold Hashlets to an even more extreme degree. It had oversold altcoin-mining Hashlets by at least about 100 times its computing capacity, and bitcoin-mining Hashlets by at least about 5 times its computing capacity.

50. Though GAW Miners built a data center that, by November 2014, contained significant computing capacity for mining bitcoin, it made no increases to its computing capacity for mining altcoin.

Well 3 points here. First, they certainly had capacity since the start and they continued to expand it to the point that the company actually set up a data center to increase mining capacity. Second, given the sensationalized language throughout this complaint, I read 50) as regarding the data center containing "significant capacity for mining bitcoin" in November as the company bitcoin mining capacity is no longer "dramatically oversold" at 3-4x capacity. Instead the company can now deliver that and more.

The complaint doesn't mention this convenient little fact and instead uses a literary technique in the previous paragraph called foreshadowing in an attempt to (mis)lead the reader down the narrative of ongoing and perpetuate fraud but turning focus on alt coins now that bitcoin capacity has been take care of.

I am not familiar with the company nor the crypto currency scene that long ago so I can be entirely wrong. However, my intuition tells me that during this time frame there was probably a drop in Bitcoin Price coupled with a spike in one or more alt coin price causing the influx of orders to be diverted from bitcoin to AltCoin.


Certainly bad news for the company after just opening a data center for mining bitcoin. Fraudelent


I'll continue reading the complaint and given the comments on this thread I am most LIKELY ENTIRELY WRONG, but something just doesn't add up. So far I take it this as an ambitious entrepreneur getting caught by the market and going belly up.

If there was deliberate fraud and scam I hope the SEC makes a better case for its complaint in the last 8 pages besides contracts were being sold at slightly higher capacity, which can easily be remedied in hours or argued against that it was never expected for all of those contracts to be utilized at the same time... (much like ISPs and cell providers over sell capacity for internet and data bandwidth and offer "bursting").

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December 02, 2015, 04:08:46 AM
 #32

Okay.. even more:

Quote
First, from approximately August through December 2014, GAW Miners’ website, and other promotional materials, described Hashlets as always profitable and never obsolete. Garza also claimed on numerous occasions, including in a Hashtalk.org post in August 2014, words to the effect that “there will never be a time a Hashlet costs more to run than you make, and they will always make money.” GAW Miners also claimed, on its website, that Hashlets would never break down or expire and this “guarantees your investment is protected and secure, so you can enjoy many years of owning the world’s most advanced miner.”

What entrepreneur is going to say otherwise? You could certainly state that (without the claim of always being profitable) make similar claims. "Host your data with us. It will be protected for ever and will never be obsolete. You can't say that about your current cell phone or PC. Just think a decade ago people were storing images and videos on zip drives and floppy drives... now obsolete. Hard drives and SD cards in the same way will be obsolete in another decade... File formats will change, Image compression algorithms will go by the wayside all part of planned obsolescence....."

For the claim about "always making money" really need to dig in specifics... Sure make that claim and if at some point for some reason you can't profitably mine one currency then mine another. If all mining is unprofitable then shutdown shop and return the deposits for the mining contract. This claim by no means spells fraud or intent to defraud.
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December 02, 2015, 04:10:14 AM
 #33

Okay, I am confused and admittedly don't know the history of this firm or its activities.

I am currently on page 15 of 23 of the actual SEC complaint and so far, there a few "wild cards" that are like damn, if this guy did that he is toast....

However... !!!! When reading the actual statement of facts in the complaint, which spell out claims the SEC it so far appears to me that the SEC is failing to substantiate the claims it made in the first few pages of the complaint, almost to the point the snippets in the news articles on the complaint are "sensationalist" claims being made by the SEC.

To be fair, I don't know any of the facts, but from the actual complaint itself I get the feeling these charges are being beefed up.

I take it from the comments on this post that the company in question went belly up. That does not mean there was a deliberate attempt at a ponzi scheme, but again I don't know all the facts. However, the accusations in the compliant, thus far aren't being substantiated well and if this guy did do in fact what he is being accused of Defense counsel is going to have a field day ripping apart the claims being brought forth because so far, and I am not all the way through, many of them seem bogus and sensationalized.



Legal documents are so hard to read, kudos to you for even trying.
"We" know he is guilty (based on his promises & lies, and the way he deleted important posts from his forum, and... etc, etc.)
The gov't might have a tough time substantiating the claims in a court of law, but people who lived through it did see a "deliberate attempt at a ponzi scheme".

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December 02, 2015, 04:24:39 AM
 #34

Oh it gets better... Here's the SEC reasoning on why 29 was fraudulent:


Quote
At the time GAW Miners and Garza made, or Garza authorized, these statements, they knew or should have known that these statements were untrue. They knew or should have known that the profitability of virtual currency mining depended on many unforeseeable factors, including the market price of those virtual currencies, the cost of the electricity and cooling for the equipment, and the extent to which the speed of developments in computing technology made any equipment they owned obsolete. GAW Miners and Garza thus had no reasonable basis for these statements at the time they made or authorized them.

Really... because the profitability of mining a currency depends on unforeseeable factors? Of course then switch to a different currency. Bringing in electricity or cooling is entire debatable. With proper engineering, from a strictly theoretical purpose, you can get both for free (via lets say solar) or next to free given some initial investment and/or Geo-strategizing.

As far as the extent of computing tech, moore's law is still in play AND when (and it will) that threshold plateaus hit mining difficulty will also plateau as, whether it is part of current design or not, WHEN difficulty increases to the point that mining is far to expensive to maintain the block chain either a) the code base (bitcoin speaking that is) will be changed from the planned incremental increase in difficulty or b) a fork will be created eliminating the need for the unsustainable mining capacity in which case the original fork will most likely continue to exist due to dissenters and will need to implement a to continual survival.

So back the SEC claims, not only the babble spilled out the previous paragraph but guess what there are always alt coins.

Digitization is not exempt from Darwinism. The same theories that explain the extinction of many biological species throughout the ages certainly apply to the digital organism created by mankind.

So once again, trumped up charges by the SEC.
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December 02, 2015, 04:27:43 AM
 #35

It is good for the industry for scammers to be caught. They increase the sense of security and make other scammers think it twice before going into a scam scheme.

Hope the days are even clearer as times goes by.

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December 02, 2015, 05:17:07 AM
 #36

Okay, getting to the end there are more specific accusations but even these accusations are clouded in obscurity and you can certainly pick apart claims in certain paragraphs which are contradicted by statements of facts given in other paragraphs.

Yes, this is civil suit and given the weakness of the complaint will most likely stay that way.

I wouldn't be surprised if this becomes a class action lawsuit in which those allegedly defrauded are paid out 5 to 10 cents on the dollar for what they were defrauded for.

Another key point to make is the actual "charges" being alleged all seem to hinge on "hashlets" being a security. That is the underlying basis for the three compliants, that they were sold under the pretense of fraud, that they were bought under the pretense of fraud and that the said exchanges were done without registering them as a security.

I imagine defense will certainly argue that these were not securities. In order for "hashlets" to fall under the definition the scope of what consists as a security would need to be widened to an almost incomprehensible scope. I say that because such a broad scope would encompass such a wide array of online services, not just mining, but services such as cloud computing offered by Amazon and Microsoft which in turn begins the path down the slippery slop of cloud storage being a security.

If defense counsel has any wits about them at all they will file to dismiss. Even if plaintiffs were to refine the complaint and limit the cloud computing services to those involving the mining of an online currency then such same definition must apply to sites such as Nice Hash which in a similar manner offer could mining services to buyers.

You would certainly have a better chance of charging GHASH.IO with selling an unregistered security given the direct tie to an exchange but given either example both I think are a far stretch to consider a "security".

Unless the courts are willing to broaden the definition of a security to include cloud computing services such  as Microsoft Azure, Amazon's EC2, GigaHash and NiceHash the SEC might have problems bringing this case before a Jury. That is if the defense counsel has any wits and the defense doesn't fold into the aforementioned class action settlement.

Claims by that the "hashlets" were marketed as 'never being obsolete', etc... certainly muddies the waters. But as I have previously done this certainly could be argued. Counter examples can easily be given in analogies for example referencing  the marketing tactics of nearly any given Web Development shop, SEO company or a Pod Casting Company.
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December 02, 2015, 05:28:20 AM
 #37

The GAW's and the ghashes episodes is done now, we can only learn from our mistakes. I think Gavin's statement at one stage, that said "All cloud mining is probably Ponzi scheme's" took the lead in the ending of most of these scams. He had a cult following and they shill'ed the shit out of rumours going around, that it was a Ponzi.

Fingers burned, lesson learned. ^hmf^

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December 02, 2015, 05:53:32 AM
 #38

To be fair, I don't know any of the facts

From your incredulity so far, it is quite evident that you don't know any of the facts. Before you dig your hole any deeper, you might want to learn something about the facts of the case, as uncovered by independent non-professional investigation (the SEC ain't gonna share their files with you, you need another source):

https://bitcointalk.org/index.php?topic=857670.0

You might want to prepare a bushel of coffee beans before you launch in. Thread is long. Evidence is copious. And while some skepticism about actions brought about by agencies of the government is healthy, you're just making yourself look stupid by assuming that this is nothing more than malicious prosecution.

Anyone with a campaign ad in their signature -- for an organization with which they are not otherwise affiliated -- is automatically deducted credibility points.

I've been convicted of heresy. Convicted by a known extortionist. Read my Trust for details. https://www.youtube.com/watch?v=sglyFwTjfDU
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December 02, 2015, 05:56:16 AM
 #39


The SEC wrote:

    “Defendants’ Hashlet sales had many of the hallmarks of a Ponzi scheme. Because defendants sold far more computing power than they owned and dedicated to virtual currency mining, they owed investors a daily return that was larger than any actual return they were making on their limited mining operations."

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December 02, 2015, 06:27:56 AM
 #40

19 million....wow

I wonder how many people are currently running similar operations, without any of us knowing? Many of which could probably put Garza's 19mil profit to shame...crazy to think about

thank about the 1000+ altcoin's in existance.. all promising the world but ending up leaving people with a bag or crap..

am i the only one that think the ppl who invested in "scamcoins" deserve what coming to them?

I mean they all just want to get rich quick. They even talk shit about bitcoin and persuade more greedy pigs to join in.

Just look around in Alternative Coin section, tell me if you dont feel disgusted about this side of cryptocurrency.


Lol, the business model of GAW was different. People invested in a reputable company that sold asics. They had a good reputation.

Then they launched their Hashlets (cloud mining) which were promised a guranteed profit.

How can that not be misleading?

Paycoin came long after that,..


That is what got me about all this (I did not have anything in GAW/Paycoin) ..is HE COULD HAVE DONE SOMETHING LEGIT with the leverage he had as a legit
hardware manufacturer ..in other words you are a legit hardware place *up to this point* you announce  you are gonna make an alt coin and link it in a 'modest
and legal manner of some sort* to your business...probably by providing 'seed money' for such

you tell people they can get in or not..hype it all you want and say the market will do what the market will do for price..its out of your control

he would have killed....at that point in time...if an alt coin would have launched at $1 say because the same hype existed that the whole thing was legit
(and hell actually was legit) the same movement that drove the hope of the ponzi...would have returned his 'seed money' into his new ALT and viola
the damn alt would probably still exist today and do well at worse it would have brought new IPO $$$ to his hardware arm and got press etc win/win imho

so the problem was ego..and greed..it would have worked well with his asic mnfg previous reputation....hell maybe even the paycoin cloud mining
would have worked under such a scenario....obviously the 'desire' for such a hardware company alt existed AS LONG AS YOU TOLD FOLK IT WAS
A SPECULATIVE GAMBLE and stated your dream and were legit and let them decide if they wanted to play in his unicorn/rainbow hope of an alt coin.
(hell its how AMWAY started for crying out loud....)

so man they had a good shot to make a new alt as legit and up front as such a speculative gamble on such could be ...and likely with proper modest
exceptions on such and telling folk it was a 'long shot' and no real way to guarantee return etc with the 'hype' of the times they would have probably
pulled it off ..imho on the coat tails of their previous legit hardware operation..if it was 'take my money' as a ponzi...it still would be 'take my money'
if folk involved still thought it was a legit shot at something again imho (i know about this at one time i drank the bfl kool aid of no product on time
at least from what I understand gaw did before the paycoin fiasco DID get equipment out..they had some basis for looking legit imho before the paycoin
downward spiral and hype)



power corrupts ..no doubt....just look at the trail of tears and greed in the asic miner universe..the list is long

but anyway i look at this as a lost opportunity they had a real shot at having fun make an alt with little risk and get the gaw name out as such for
more hardware development etc...I mean hell the IPO $$$ alone if you got a half assed legit alt out the door would have been enough just for the
PR and press hype

nope ...megalomaniac that josh was ....and probably the need for 'self destructive behavior" and 'say delusion of 20 buck coin launch' painted himself in
the corner and such...obviously josh believed his own hype because he had no way out when it all went to hell ...classic megalomaniac self destruction

too bad ....if done correctly and ethically by say another hardware proven asic mnfg the whole landscape of alts could have changed or something
could have evolved in a new manner ...we will never know.....no one else will ever  from the hardware point of view with a good rep will ever take a chance
of something like this ever again (talking a legit shot not a scam) josh pretty much pissed in the pool on this idea and no one will ever get into that
pool again..that is legit anyway imho..anyway scams come and go...he pissed away at least a legit shot at making a new alt with a bit of seed $$$
on such ..it likely would not of worked..but god the press he got on paycoin and the IPO $$$ and eyeballs he could have got for the daring of such
even if it went belly up..the alt coin....if done legit at the worse he'd be known...look like he gave it a legit shot...and boosted his 'exposure' in the
world of btc and crypto with the world wide press and others interested in his hardware arm after the fact

the bounds of stupidity are not just in the area of the ponzi or paycoin .....it extends into the real area of legit business and killing his hardware line
etc.....a mushroom cloud of stupid ....of a nuclear bomb variety in a 360 degree direction.....heh go big or go to jail i guess was always his megalomaniac
egotistical self destructive 'bet' i guess..well you reap what you sow as they say

but damn even as a half assed sideline the press/hype etc and daring of such a 'legit' (or real legit attempt) would have really pumped up his sales
and hardware side imho ..it coulda been at worse a draw (hey guys that did not work) or a win/win

well anyway my view on this (remember I'm the guy that at one time in 2013 drank the bfl kool aid ...got a refund 1yr 20 days later thru dumb luck
..but still....can't get around the fact i did drink the bfl kool aid ...who by the way STILL ARE NOT IN JAIL.....so take what I say with a grain of salt.)





but man a classic example of self-destructive narcissistic megalomania if ever existed...wait for the trial and his defense that he was the 'victim' it
will be a freaking circus or self-denial imho

sheesh




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