The Securities and Exchange Commission filed civil fraud charges against a Vermont man and two companies he controlled, alleging that the purported Bitcoin mining operation touted to investors was a giant Ponzi scheme that took in at least $20 million from over 10,000 victims. In a complaint filed today in a Connecticut federal court, the Commission charged Homero Joshua Garza, GAW Miners, LLC, and ZenMiner, LLC with multiple violations of federal securities laws. The Commission is seeking injunctive relief, disgorgement of ill-gotten gains, imposition of civil monetary penalties, and prejudgment interest. The enforcement action is the second filed by the SEC involving allegations of a Bitcoin-based Ponzi scheme. Image by Antana via Creative Commons According to the Commission, Garza, who is 30 years old, owned and controlled GAW Miners and ZenMiner. GAW Miners initially set out to purchase Bitcoin mining equipment from overseas manufacturers and resell it to customers. ”Bitcoin mining” refers to the process through which high-powered computers are used to compete to solve complex algorithms that reward the victor with newly-minted Bitcoins. Bitcoin miners, as they are known, have increasingly employed massive amounts of pooled computing power in an attempt to profit by being the quickest to solve the equations.
After switching the business of GAW Miners again in Spring 2014, Garza created ZenMiner and touted a new partnership between GAW Miners and ZenMiner known as Cloud Hosted Mining (“CHM”). The strategy of CHM was similar to GAW Miners’ previous operation, in that it entailed the payment of a fee to CHM to host and maintain a customer’s mining equipment, but only allowed those customers to direct the processing power of their hardware to a handful of mining pools offered by ZenCloud. Garza allegedly deliberately distanced himself from association with ZenMiner to create the appearance of an independent […]
