Josh Garza, the CEO of the collapsed cryptocurrency mining company GAW Miners, has been sentenced to 21 months in prison for defrauding $9.2 Million. Garza, 33, pleaded guilty to one felony count of wire fraud related to the sale of cryptocurrency called PayCoin.The pioneering crypto-crime case GWA reached a critical milestone with this court order. Some more lawsuits against the GAW promoters are still pending.
In 2014, GAW Miners, a US company founded by Josh Garza and sometimes labeled itself as one of the world’s foremost bitcoin mining hardware manufacturers and digital cloud mining providers, initially served as a reseller and distributor of mining equipment and moved later into the hosted mining business – that is, the scheme would purchase and operate mining hardware on behalf of its customers (like Bitclub Network, Cointed, biTex, 21C,…)
In December of 2014, GAW launched PayCoin (XPY) (like BitClub issued Clubcoin or USI-Tech issued its TechCoin ). At the time, Garza publicly declared, “I have confidence that Paycoin will be established as the new dominant global online currency.” The coin was pitched as having a price “floor” at US$20. Cantor Fitzgerald, L.P. (a partner to GAW Miners) explained “With the marrying of innovation, technology, finance and regulation — I believe that cryptocurrency can provide a value proposition that has never before been contemplated in global commerce and thus has the real possibility of being a viable mainstream currency accepted by the masses around the globe.”
Apparently, the price of PayCoin did not develop as expected according to the chart on coinmarketcap.
On September 13, 2018, Josh Garza, has been sentenced to 21 months (after the guilty plea for wire fraud) in prison. Initially, the court set a maximum prison sentence cap of 20 years for Garza in July last year. – It was reduced reduced on account of the convict’s agreement of repaying customers $9.2 million. When released from prison in 2021, Garza will further face a six-month home confinement and three years of supervised release.
This is another important judgment in this case. Authorities across different jurisdictional regimes raised a row of fraud allegations which started out in December 2015, when Garza, GAW, and ZenMiner (an associated cloud-mining scheme allegedly also operated by Garza) were sued by the SEC for the unlicensed sale of securities and operating a PONZI scheme by selling more cryptocurrency mining processing power than the firm actually possessed. Actually, COINDESK extensively reported on the case (read here).
Already in 2016, some class actions from former customers and investors were initiated. The plaintiffs purport that Garza, Fraser, and GAW defrauded investors via GAW mining, ZenMiner, Paycoin, Hashlets, and their other financial products and mining services from March to December 2014.
Nearly two years after the initial SEC lawsuit filing, a U.S. district held Garcia liable for more than $9 million, a move that came months after the SEC’s bid for an $11 million default judgment against GAW Miners and ZenMiner was approved.
So finally the original allegations of fraud made against GAW – vociferously denied by Garza and other supporters at the time – ultimately proved to be true in the wake of the company’s 2015 collapse and subsequent lawsuits initiated by the U.S. Securities and Exchange Commission (SEC) and, later, the Justice Department.
What can we learn from the GAW case?
Evidently, the SEC is faster than the European authorities – this perhaps is the reason why projects like the Bitclub Network and other schemes avoid to do business in the US and with US citizens. But be assured the mills of justice grind slowly but they grind and sometimes it takes longer and sometimes shorter (as with GAW mining).
Also published on Medium.