Joshua Homero Garza, the man behind the Ponzi schemes which were disguised as cloud mining operators, GAW Miners and ZenMiner, pleaded guilty to one count of wire fraud in a Connecticut court on July 20.
The announcement was made by the United States Attorney for the District of Connecticut, Deirdre M. Daly, and Patricia M. Ferrick, Special Agent in Charge of the New Haven Division of the Federal Bureau of Investigation (FBI).
The duo stated that “Garza, 32, of Texas, formerly of Somers, Conn., waived his right to be indicted and pleaded guilty today in Hartford federal court to one count of wire fraud related to his role in his companies’ purported generation and sale of virtual currency.”
Garza has been under investigation for a while now, with financial regulatory agencies like Securities and Exchange Commission (SEC) as well as the FBI looking to bring him to justice over allegations of theft of investor money as well as fraud.
His two companies, GAW Miners and ZenMiner, were recently ordered to pay a fine of $10 million each. The Connecticut-based companies were instructed to part with the penalties after they were found to be conducting fraudulent business. In addition to the $10 million fine, each company would have to pay $1 million as a civil penalty. The two companies purported to be bitcoin mining operations but were really Ponzi schemes that used new investor money to pay off older investors.
“Between approximately May 2014 and January 2016, Garza, through GAW, GAW Miners, ZenMiner, and ZenCloud, companies he founded and operated, defrauded victims out of money in connection with the procurement of virtual currency on their behalf. The companies sold miners, access to miners, and the right to purchase a virtual currency called paycoin, as well as hashlets,” explained the District Attorney’s office.
The district attorney detailed his mistruths saying “Garza made multiple false statements related to the scheme, including stating that GAW Miners’ parent company purchased a controlling stake in ZenMiner for $8 million and that ZenMiner became a division of GAW Miners.”
With regard to fraudulent claims of mining ability, Daly stated, “GARZA’s companies sold the customers the right to more virtual currency than the companies’ computing power could generate.”
After investigations by the FBI had found Garza to be guilty of defrauding his investors over $9 million, he pleaded guilty to the charges leveled against him. Due to be sentenced on October 12, 2017, by U.S. District Judge Robert N. Chatigny, Garza faces a possible 20-year prison term.