SEC seeks default judgement against Josh Garza, GAW Miners over Bitcoin Ponzi scam

The US Securities and Exchange Commission (SEC) has filed a request for default judgement against Homero Joshua (Josh) Garza, GAW Miners and ZenMiner, over charges that Garza, through the two companies, perpetrated fraud by offering shares in an alleged digital Bitcoin mining operation while never having enough computing power for the mining it promised to conduct.

According to documents lodged with the United States District Court, the SEC isn’t pussyfooting around either and asks that court that “that judgment permanently enjoin those entities from future securities law violations and order them to pay disgorgement and prejudgment interest of $10,384,099, and an appropriate third civil penalty.”

“Both GAW Miners and Zen Miner engaged in serious violations of the federal securities laws by virtue of their scheme to oversell Hashlets well beyond their available computing power to manufacture a customer interface to mislead investors into thinking that they were receiving returns from virtual currency mining”, the document read.

Sordid tale

If you don’t recall the entire sordid tale, the SEC charged the two companies and Garza for operating a Ponzi scheme in December, the culmination of an investigation that started in January 2015.

“Most investors paid for a share of computing power that never existed,…Returns paid to some investors came from proceeds generated from sales to other investors.”

“As alleged in our complaint, Garza and his companies cloaked their scheme in technological sophistication and jargon, but the fraud was simple at its core: They sold what they did not own, misrepresented what they were selling and robbed one investor to pay another,” the SEC’s Boston Regional Office Direct Paul G. Levenson said previously.

The request for a default judgement in the case is due to one very simple, and given the history, strange fact: neither Garza nor the two companies responded to the official complaint within the required time period, so there being no defense to the charges the SEC is asking the court to find them undefended and hence proven.

It’s not clear from reports exactly what “appropriate third civil penalty” may entail, particularly for Garza personally, but there is still the off chance that he could be thrown in jail for his role in a crime that is believed to have sucked in a staggering 10,000 plus investors, with most never recovering the full amount of their investments.

Image credit: acidpix/Flickr/CC by 2.0
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Duncan Riley

Duncan Riley

Duncan Riley is a senior writer at SiliconANGLE covering Startups, Bitcoin, and the Internet of Things.

Duncan is a co-founder of VC funded media company B5Media and founder of news site The Inquisitr, and was a senior writer at TechCrunch in its earlier days.

Tips? Press releases? Intersting startup? email: or contact Duncan on Twitter @duncanriley

Duncan Riley


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