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Josh Garza, CEO of the now defunct cryptocurrency mining company GAW Miners, was sentenced to 21 months in prison after pleading guilty to fraud.
Garza was sentenced to six months imprisonment part of a 3-year trial period following his release.
Thursday's conviction capsule has a long history that began in 2014, with allegations that GAW functioned as a Ponzi scheme by selling other cryptocurring mining power than the one actually owned.
It also marks a sort of conclusion for an initial effort by the US government to oversee the crypto space, arguing undoubtedly the stage for some of the actions and legal actions presented in the last year and a half against a handful of alleged scammers.
The original allegations of fraud made against GAW – blatantly denied by Garza and other supporters at the time – eventually turned out to be true following the collapse of the company in 2015 and subsequent legal actions initiated by the Securities and Exchange Commission (SEC) of the United States. and, later, the Department of Justice.
The company's internal emails leaked between the collapse of the GAW also included revelations on paycoin, its failed cryptocurrency project that had a "minimum" price of $ 20, plus confirmation that the company was being investigated by the SEC.
Paycoin would later be included in the Justice Department's case against Garza, with the SEC avoiding that element of GAW's operations focusing on the so-called "hashlets", which the company had termed "virtual miners" that the regulator of the United States later considered a security.
Garza pleaded guilty in July of last year in the case of the Justice Department, although the SEC case remains in force,
Controversial Company
GAW Miners, based in the United States, initially served as a retailer and distributor of mining equipment, and then moved into hosted mining, or the company bought and ran machines on behalf of its customers.
Towards the second half of 2014, GAW began to launch the Hashlet, which the company sold through an internal market. It was around this time that skepticism about GAW claims began to grow steadily, including questions about its mining operations, relationships with well-known companies, and Garza himself, who played an oversized and sometimes controversial role in public messaging on social media channels and in the media.
In fact, GAW made waves that August, when it announced that it had purchased the BTC.com domain name for $ 1 million. Subsequently, it was shown that the domain name was obtained through a long-term agreement that has expired.
In December 2014, GAW launched the paycoin. At the time, Garza publicly stated "I am confident that the paycoin will be established as the new global dominant online currency."
But the opposition to GAW was steadily growing, with a public gap widening among the often zealous customers of the company on its official forum and on opponents – in many cases customers or former customers themselves – on BitcoinTalk. Furthermore, the currency has been positioned as a payment-friendly altcoin with the support of GAW.
However, as reported by CoinDesk at that time, the paycoin would eventually fail due to the same pump-and-dump tactics that Garza and GAW condemned when you cast it. As CoinMarketCap data show, the $ 20 "floor" paycoin did not last long, as the price fell below $ 2 by the end of January 2015.
A repurchase plan was subsequently announced, but the price of cryptocurrency has continued to fall on the days that followed
Road to fraud lawsuits
Ultimately, the paycoin debacle would prove to be the first step in a one-month collapse for GAW. The period saw Garza himself go (in the eyes of some) from the messia criptovaluta to paria cryptocurrency.
February saw the release of hundreds of thousands of internal emails, including those written by Garza himself, which revealed the existence of the SEC investigation – reported first by the cryptocurrency blog CoinFire but denied in that moment from society. Subsequently, the leaked emails would also show that GAW had, in fact, sold more processing power than it possessed.
The following weeks and months marked the emergence of new efforts to revive the fortunes of GAW, through abortive services such as Mineral (an exchange cryptography) and CoinStand (a site focused on paycoin for the purchase of products from Amazon).
That summer, an electric company in Mississippi won a default judgment against GAW after the company failed to pay power in a state facility [19659003] In December 2015, Garza, GAW and ZenMiner, a affiliated mining company, have been sued by the SEC for the unlicensed sale of securities and management of a Ponzi scheme, as reported at the time by CoinDesk. An investigation by the Department of Justice, simultaneously with the SEC research, culminated with the accusation of telegraph fraud.
Nearly two years after the initial filing of the SEC case, a US District Judge found Garza responsible for more than $ 9 million, a move that arrived months after the SEC bid for a default judgment $ 11 million against GAW Miners and ZenMiner was approved.
Josh Garza (right) image through the CoinDesk archives
The leader in the blockchain news, CoinDesk is a media outlet that fights for the highest journalistic standards and adheres to a strict set of editorial policies . CoinDesk is an independent operating subsidiary of the Digital Currency Group, which invests in criptovalute and blockchain startups.
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