Multi-company owner caught in $9 million investment fraud scheme.
Homero Joshua Garza is one of the most hated personalities in the cryptocurrency market. Between May 2014 and January 2016, Garza defrauded victims in connection with the procurement of virtual currency. He did this through companies he founded and operated; GAW, GAW Miners, ZenMiner, and ZenCloud. The companies sold miners and access to miners, along with purchase rights for a virtual currency called “paycoin”.
In addition to this, the businesses sold “hashlets” which entitled investors to a share of profits purportedly earned by GAW Miners or ZenMiner, when mining virtual currencies using computers in their data-centers. Put simply, hashlet customers bought the rights to profit from a slice of the computing power owned by GAW Miners and ZenMiner.
To generate business and attract investors, Garza made multiple false statements relating to his scheme, including a statement that GAW Miners’ parent company had purchased a controlling stake in ZenMiner for $8 million, and that ZenMiner had become a division of GAW Miners. In fact, there was no such transaction.
Garza also stated that the hashlets sold by his company engaged in virtual currency mining. In fact, his companies sold more hashlets than could be supported by the computing power of his data-centers. In other words, Garza’s companies sold the rights to more virtual currency than the companies’ computing power could generate.
Garza further stated that the market value of a single paycoin would not fall below $20 per unit, because his companies had a reserve of $100 million, which would be used to purchase paycoins, and to drive up their price. In fact, no such reserve existed.
During his scam, Garza, used money he made from new hashlet investors to pay previous hashlet investors. These payments covered the funds that he owed them for the purported mining GAW Miners and ZenMiner had done on their behalf