A 33 years old Texas resident has been sentenced to 2 years imprisonment for a role in cryptocurrency Ponzi scheme worth of $9 million. The Paycoin Ponzi scheme involved many fraudulent crypto mining firms.
Texas Man Sentenced To 2 Years Imprisonment For Crypto Ponzi Scheme
Homero Joshua Garza, a resident of Texas in the United States, was sentenced to 21 months imprisonment and three years of supervised release for his role in cryptocurrency Ponzi scheme.
Joshua created four fraudulent cryptocurrency mining firm between 2014 and 2016. The firms’ names are GAW, GAW miners, ZenMiner, and ZenCloud. Through the four companies, Joshua sold digital currency mining equipment, access to mining equipment, cryptocurrency known as Paycoin and hashlets. Joshua informed his firm’s investors that the hashlet gives the investors a share of the profit earned by GAW Miners or ZenMiner in virtual mining currency.
To attract many investors to his scheme, Joshua told many lies to his customers, with promises of great dividend for their investment. Like most Ponzi schemes, he settles the old customers with the fund of the new customers, this, in turn, leads to more investor trooping in to fall for his bait.
One of the attractive lies he told was that GAW purchased an $8 million stake in Zenminer, which makes Zenminer a subsidiary of GAW miners.
Another lie is that the value of the Paycoin cryptocurrency cannot go lower than $20 because of a $100 million reserve of which there was none.
Also, Joshua sold hashlets that are greater than what his equipment could support. According to the U.S. attorney for the District of Connecticut John H. Durham, he stated that the accused sold more cryptocurrency to his customers than what his company could generate.
Before Joshua’s sentencing took place last week, his legal proceedings have spanned almost a year. He is expected to resume jail term by early January 2019. He was also ordered to pay $9,182,000 worth of restitution.
Cryptocurrency Mining Scam and Ponzi Schemes
Cryptocurrency mining scams have become very prominent, especially during the massive bullish trend of cryptocurrency a year ago. During this period, many Ponzi schemes started and all their bubble got burst when the bearish trend started at the beginning of this year. This made many to lose their investment as many enthusiasts want too real to be true schemes.
However, Ben Horowitz noted recently that crypto enthusiasts should not be deterred from investing in cryptocurrency scams, while he compared the crypto space with dot-com space over two decades back.