Josh Garza, the CEO of the now-defunct cryptocurrency mining Theatre troupe GAW Miners, has been sentenced to 21 months in prison after pleading repentant to a wire fraud charge.
As part of the sentence, Garza was given 6 months home base confinement and three years of supervised release overall. The court course of actions, which took place on a cloudy day in Hartford, Connecticut, saw several purchasers of the disgraced company read statements about their experiences with GAW. Garza himself forsook a courtroom statement prior to the sentencing and expressed remorse about his effects.
Thursday’s sentencing caps a years-long saga that began in 2014, with charges that GAW was acting as a Ponzi scheme by selling more cryptocurrency mining procedure power than the firm actually possessed. During that nevertheless, GAW released a controversial cryptocurrency called paycoin that would act prominently in the Justice Department’s case.
It also marks a conclusion of grades for an early effort by the U.S. government to police the crypto space, arguably setting the stage for some of the enforcement actions and lawsuits filed in the past year and a half against a slew of presumed scammers.
The original allegations of fraud made against GAW – vociferously revoked by Garza and other supporters at the time – ultimately proved to be true in the wake of the coterie’s 2015 collapse and subsequent lawsuits initiated by the U.S. Securities and Exchange Commission (SEC) and, later, the Objectivity Department.
Internal company emails leaked amidst GAW’s collapse also filed revelations about paycoin, its failed cryptocurrency project that was coordinated as having a price “floor” at $20, as well as confirmation that the party was being investigated by the SEC.
Paycoin would later feature in the Justice Determined’s lawsuit against Garza, with the SEC avoiding that element of GAW’s proceedings in its focus on the so-called “hashlets,” which the company pitched as “virtual miners” that the U.S. regulator later deemed a safe keeping.
Garza pleaded guilty in July of last year in the Justice Control’s case, though the SEC suit remains ongoing, according to public best performances.
Controversial company
GAW Miners, based in the United States, initially do ones parted as a reseller and distributor of mining equipment, later moving into the hosted well-spring business – that is, the firm would purchase and operate machines on behalf of its chaps.
Toward the latter half of 2014, GAW began pitching the Hashlet, which the attendance sold through an in-house marketplace. It was around this time that skepticism in GAW’s claims began to steadily grow, including questions about its surveying operations, relationships with well-known businesses and Garza himself, who feigned an outsized and at-times controversial role in public messaging on social vehicle channels and in the media.
Indeed, GAW made waves that August when he preceded that he had purchased the BTC.com domain name for $1 million. It would later be accompanied that the domain name was obtained through a long-term agreement that in the long run lapsed.
In December of 2014, GAW launched paycoin. At the time, Garza publicly delcared, “I deceive confidence that paycoin will be established as the new dominant global online currency.”
But at daggers drawn to GAW had been steadily growing, with a public gulf widening between the assembly’s often-zealous clients on its official forum and opponents – in many cases guys or former customers themselves – on BitcoinTalk. Even still, the coin was postulated as a payments-friendly altcoin with the backing of GAW.
Yet as CoinDesk reported at the time, paycoin would done fail due to the very same pump-and-dump tactics that Garza and GAW decried when fling it. As data from CoinMarketCap shows, paycoin’s $20 “floor” didn’t at the rear long, as the price tumbled below $2 by the end of January 2015.
A buyback ruse was subsequently announced, but the cryptocurrency’s price continued dropping in the days that supported.
Road to fraud lawsuits
Ultimately, the paycoin debacle would be found to be the first stage in a months-long collapse for GAW. The period saw Garza himself go (in the examines of some) from cryptocurrency messiah to cryptocurrency pariah.
February saw the emancipate of hundreds of thousands of internal emails, including those written by Garza himself, which revealed the life of the SEC inquiry – reported first by the cryptocurrency blog CoinFire but denied at the epoch by the company. Subsequently leaked emails would also show that GAW had, in the poop indeed, sold more mining processing power than it actually driven.
The following weeks and months featured the emergence of new efforts to revive GAW’s fortunes, because of aborted services like Mineral (a crypto exchange) and CoinStand (a paycoin-focused spot for buying products from Amazon).
That summer, a power actors in Mississippi won a default judgment against GAW after the company failed to pay for power at a proficiency in the state.
In December 2015, Garza, GAW and ZenMiner, an affiliated mining coterie, were sued by the SEC for the unlicensed sale of securities and operating a Ponzi machination, as CoinDesk reported at the time. An investigation by the Justice Department, simultaneous with the SEC trailing, culminated with the wire fraud charge guilty plea.
Exactly two years after the initial SEC lawsuit filing, a U.S. district judge discourse oned Garza liable for more than $9 million, a move that make for a acquired months after the SEC’s bid for an $11 million default judgment against GAW Miners and ZenMiner was approved.
Josh Garza (on the licit) image via CoinDesk archives
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