The United States Securities and Exchange Commission (SEC) has announced its first win in the legal battle against two bogus Bitcoin mining companies – GAW Miners and ZenMiner – both operated by one Homero Joshua Garza, who is looking at a $12 million penalty and some jail time.
Through the two companies, Garza used the “lure of quick riches” to attract investors into a typical Ponzi scheme that would eventually issue payouts only to a select few investors, leaving other stakeholders out in the cold.
The companies purportedly offered to fatten investors’ Bitcoin wallets in exchange for their computing power in a practice known as “mining.” Bitcoin mining is done by using computing hardware to solve complex mathematical problems to keep the electronic currency alive and to grow its value. Computers are awarded new virtual currency when they solve the equation. The only problem with Garza’s two bogus companies was that they did not, in fact, have the promised computing horsepower.
“…GAW Miners and ZenMiner did not own enough computing power for the mining they promised to conduct, so most investors paid for a share of computing power that never existed. Returns allegedly paid to some investors came from proceeds generated from sales to other investors,” the SEC said.
Garza reportedly ran the scheme from 2014 to 2015, amassing just shy of $20 million in cryptocurrency from 10,000 investors. He will reportedly have to cough up $10,384,099 in disgorgement and prejudgment interest, as well as $1 million in court fees. The US Department of Justice and the FBI are looking for more investors affected by GAW Miners’ operations. In the meantime, the investigation against Garza continues in order to establish a final sentence for the perpetrator.
It is worth noting that, at the time Garza was running the scheme, 1 Bitcoin was worth around $450. Its value has since soared to reach $2,800 per Bitcoin, which means Garza’s balance now sits at roughly $120 million.