American citizen Homero Joshua Garza has been fined $12 mUSD for running the fraudulent GAW Miners and Zenmining cloud-mining scams.
Also read: European Commission Launches Digital Currency and Dark Web Consortium
Allegations of fraud emerged against the former CEO of GAW Miners during 2015, as US investors accused Garza of running a Ponzi scheme that generated nearly $20 million.
Garza offered investors a share in the profits being generated by his mining hardware, which he claimed consisted of state-of-the art in-house custom-built hardware. Garza sold more than 10,000 investment contracts that represented shares in his cloud-computing scam before allegations surfaced against his companies in 2015 – both of which ceased operations later that year. Garza’s is not the only case of conmen running Ponzi schemes under the guise of cloud-mining services – with similar companies such as Gemcoin, CoinTerra, and HashFast also being accused of comparable practices over the course of recent years.
“Sold Far More Computing Power Than They Owned”
A criminal complaint filed by the US Securities and Exchanges Commission in December 2015 alleged that “Because [GAW Miners] sold far more computing power than they owned and dedicated to virtual mining, they owed investors a daily return that was larger than any actual return they were making on their limited mining operations. In a statement, the director of SEC’s Boston Regional Office, Paule G. Levenson said that, “Garza and his companies cloaked their scheme in technological sophistication and jargon, but the fraud was simple at its core: they sold what they did not own, misrepresented what they were selling, and robbed one investor to pay another.”
The sentencing of Garza is of important timing, as a flood of new investors have been racing to enter the Bitcoin and altcoin markets following heightened media attention surrounding the meteoric boom enjoyed by cryptocurrencies at the start of 2017. Many new users are at high risk of falling prey to fraudulent businesses such as those run by Garza, who seek to prey on inexperienced market participants. These cryptographic snake-oil salesmen lure naive investors with promises of exorbitant riches, accruing fortunes with no intention of paying returns to investors.
Community Still a Long Way From Embracing Lawmakers
With blockchain technology edging closer to mainstream adoption each day, the legal ambiguity pertaining to fraudulent businesses within the cryptocurrency industries is rapidly dissipating – with trials such as Garza’s showing that conmen operating using bitcoin are vulnerable to prosecution.
Despite the overt benefits of Garza’s sentencing, some within the Bitcoin community have expressed concerns that the lack of due diligence and prior research on the part of defrauded investors may allow regulators to use cases such as Joshua Garza’s as a justification for passing regulations designed to control or stifle the cryptocurrency ecosystem – showing that the cryptocurrency community is still a long way from embracing lawmakers.
What do you think about the sentencing of Homero Joshua Garza? Will other founders of cryptocurrencies and ICO:s experience the same fate? Let us know in the comments below.
Images via Shutterstock, GAW Miners
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