Joshua Garza, a crypto fraudster got sentenced to 21 months imprisonment, three years of supervised labour, and payment of restitution to victims. The FBI investigated the fraudster after it obtained hints from the SEC because his act not only violated civil securities laws but criminal ones as well.
Charges Against Joshua Garza
As reported on the FBI blog, Garza was involved in multiple crypto businesses which include Connecticut-based businesses (GAW Miners, ZenMiner, and ZenCloud) between 2014 and 2015 that sold bitcoin mining hardware, offered shares in a virtual currency mining operation, created and sold a virtual currency called PayCoin.
However, these businesses were noted to have been conducted illegally. This was done through a series of misleading and false statements about the companies’ capabilities, partnerships, and financial backing. This was used to fraudulently draw investors to his enterprises and eventually resorted to Ponzi scheme tactics to delay detection of the fraud.
As noted by FBI Special Agent Mark Munster, Garza started well in the industry by selling computer equipment virtual currency enthusiasts use for mining or to solve the complex equations required to attain a Bitcoin or other virtual currency. This business turned to one that offered to purchase a currency miner on behalf of the customer and see it up at GAW miners data centre.
Afterwards, Garza moved into selling shares or “harshlets” that represented a percentage of the profit being made by his company’s purportedly robust Bitcoin mining efforts. He assured the investors that it will always be profitable.
Meanwhile, mining Bitcoin at the volume that is needed to generate the type of value Garza was promising requires a staggering amount of computer power. These computers are powerful and expensive, and the same is the power needed to run them. His inability to obtain the necessary infrastructure to support the shares he was selling led to low returns and he adopted other business means to pay the return to customers.
Crypto Scam And Luxury Lifestyle Of Garza
According to Munster, Garza started marketing lie while he started adopting other means to pay the return to customers. He then created and started selling his virtual currency known as Paycoin. He refused to register before offering it to the public to invest. Also, Garza stated his firm had a reserve of $100 million that would be used to prop up the price of the crypto to make sure it does not go below $20 per unit. He also claimed a partnership with Amazon and target.
Garza’s reserve claim and partnership were found to be a lie. Also, he was found to have started living a luxury life from the proceed of the scam. This earned him the jail term and payment of restitution to victims of his illicit activities.