Busted: Texas Man Gets 2 Years in Prison for $9 Million Crypto Ponzi Scheme

A Texas resident has been sentenced for his involvement in a $9 million digital currency ponzi scheme involving several fraudulent crypto mining companies, according to a report by Patch. 33-year-old Homero Joshua Garza was sentenced to 21 months in prison and three years of supervised release. Garza will be required to spend the first six months of his supervised released in house arrest.

Garza was also ordered to pay restitution in the amount of $9,182,000

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Garza allegedly operated four fraudulent crypto mining companies from 2014 to 2016: GAW, GAW miners, ZenMiner, and ZenCloud. The four companies sold digital currency mining equipment, access to mining equipment, a virtual currency called PayCoin, and “hashlets,” which case records said “entitled an investor to a share of the profits that GAW Miners or ZenMiner would purportedly earn by mining virtual currencies using the computers that were maintained in their data centers.”

While the sentencing didn’t take place until this week, legally proceedings against Garza have been underway for at least a year. Garza had earned an infamous reputation in the cryptocurrency community long before then.

Garza Lied to Attract New Investors, Used Older Investors’ Money to Pay Them

In order to make his companies’ products more attractive, Garza told several major lies to his customers. He would then use the money collected from older investors to pay out new investors.

Garza told his customers that GAW had purchased an $8 million stake in ZenMiner and that ZenMiner had become a division of GAW Miner.

He also sold more “hashlets” than his equipment was capable of supporting. In other words, “Garza’a companies sold the customers the right to more virtual currency than the companies’ computing power could generate,” said John H. Durham, US attorney for the District of Connecticut.

Garza also allegedly told his customers that the value of PayCoins, Garza’s self-created cryptocurrency, would never fall below $20 apiece because of a $100 million reserve. Of course, no such reserve ever existed.

Garza has been ordered to report to prison in early January of next year.

Another Texas resident was arrested for crypto-related fraud earlier this year in July. Trenton T. Shavers operated a massive ponzi scheme involving 700,000 Bitcoins. At the time, the BTC was worth $4.5 million, but is worth $60 million by today’s standards.