SEC charges GAW Miners, ZenMiner CEO with operating a Ponzi scheme

[Shawn Knight]

The US Securities and Exchange Commission has charged the founder of two Bitcoin mining companies with conducting a Ponzi scheme that used the promise of quick riches to defraud investors.

The complaint – filed Tuesday in federal court in Connecticut – alleges that from August to December of last year, Homero Joshua Garza sold $20 million worth of shares in a digital mining contract through his two companies, GAW Miners and ZenMiner.

Essentially, investors were paying for processing time on the company’s hardware and would split the earnings generated from mining Bitcoins (contracts of this nature aren’t uncommon in the cryptocurrency industry). More than 10,000 investors took Garza up on the offer which was touted as always being profitable and never obsolete.

The problem, the SEC alleges, is that Garza sold far more computing power than either of his companies could produce. The complaint claims that GAW Miners directed little or no computing power toward any mining activity.

With very little revenue coming in from mining, Garza reportedly opted to pay “returns” to investors from money collected from other investors. The SEC claims most investors never recovered the full amount of their initial investment and that only a “few” made a profit.

The SEC is seeking permanent injunctive relief as well as the disgorgement of ill-gotten gains in addition to prejudgment interest and penalties. Garza’s lawyer, New York defense attorney Marjorie Peerce, told CoinDesk that her client was disappointed that the SEC filed a lawsuit against him and that any further comments will be through the court process.

It’s yet another ding to the controversial virtual currency’s reputation although as Director of the SEC’s Boston Regional Office Paul G. Levenson points out, the fraud was simple at its core.

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https://www.techspot.com/news/62999-sec-charges-gaw-miners-zenminer-ceo-operating-ponzi.html

 

[yRaz]

More than 10,000 investors took Garza up on the offer which was touted as always being profitable and never obsolete.

no investment is ever "always profitable" and many of them do become obsolete. These are the same people that send Nigerian princes their bank info.

"So I can pay someone else to do a job for me and then they send me money? That's amazing!" I really have no idea what these people were thinking

 

[Skidmarksdeluxe]

This whole cryptocurrency thing is rotten to the core spoiling for everyone who wants to acquire theirs by the book.
If this crook is disappointed by the lawsuit, I'd really love to know how disappointed he'll be when he finds out who's b1tch he's going to be when he discovers his thieving posterior in the slammer.

 

[davislane1]

When someone in the financial industry or one of its derivatives tells you X strategy always pays, you are dealing with a crook. There is no exception to this rule.

Ponzi's should be tarred and feathered prior to imprisonment.

 

[davislane1]

"It’s yet another ding to the controversial virtual currency’s reputation although as Director of the SEC’s Boston Regional Office Paul G. Levenson points out, the fraud was simple at its core."

Hardly. It would be one thing if there were some sophisticated engineering involved with the coins. The Ponzi scheme, however, is literally the oldest trick in the book when it comes to scam investments. This has implications for "mining" companies, not virtual currency itself.

 

[treetops]

Its not like you could not do the exact same thing with any other currency. By the way where do bit coins originate? Like do they only make more in exchange for processing, like a tech gold standard? Or do they spam more every year like most currency with nothing to back it up?