July 20, 2017

Gaw Miners CEO pleads guilty to wire fraud

The CEO of now-defunct Bloomfield cryptocurrency operator Gaw Miners plead guilty Thursday in Hartford federal court to one count of wire fraud, according to federal prosecutors.

Homero Joshua Garza, 32, faces up to 20 years in prison for his role in a scheme to attract investors for a virtual currency called paycoin between May 2014 and Jan. 2016.

Investors purchased the rights to profit from a slice of computing (or "mining") power in Gaw's data center, but Gaw did not have as much computing power as it had promised.

Investors lost nearly $9.2 million due to Garza's actions, according to U.S. Attorney for Connecticut Deirdre Daly's office, which prosecuted the case following an FBI investigation of the company.

Gaw used proceeds from newer cryptocurrency mining sales to pay out previous investors what they were owed, according to Daly, who said that Garza made various false statements to investors, including:

  • A pledge that the price of a paycoin would not drop below $20;

  • An announcement that Gaw had spent $8 million to purchase cloud-mining operator, ZenMiner, when it had not; and

  • A claim that Gaw had a $100 million reserve to help drive up the price of paycoin.

Garza will be sentenced Oct. 12.

His guilty plea follows a May 31 default judgement in another legal action brought by the U.S. Securities and Exchange Commission against Gaw and ZenMiner.

A Connecticut federal judge ordered each of the two companies to pay $11.4 million in disgorged profits, interest and civil penalties. The SEC said it had been investigating Gaw since early 2015.

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