Defrauding Crypto CEO Josh Garza  Sentenced in Landmark Case 8 2800

The disgraced former CEO of fraudulent crypto company GAW Miners has reached the end of a legal saga spanning more than three years. Josh Garza has been sentenced to 21 months in prison and payments of $9,182,000 in damages. His prison term will be followed by three years of supervised release, including six months of home confinement.

US Attorney for the District of Connecticut John H. Durham announced the sentence, which follows Garza’s guilty plea to wire fraud.

How GAW Miners Lost Their Zen

GAW Miners started as a cloud mining service. Fraud allegations began to emerge in 2014, and formal charges followed. The SEC accused GAW with acting as a Ponzi scheme by selling more crypto mining power than they really had. Around that time, GAW also peddled its token, PayCoin, which they promised had a $20 ‘floor.’ That floor dropped out in 2015, to the ire of beswindled token holders. By the end of January, one PayCoin was worth less than $2.

According to the Department of Justice, Garza “stated that the market value of a single paycoin would not fall below $20 per unit because Garza’s companies had a reserve of $100 million that the companies would use to purchase paycoins to drive up its price. In fact, no such reserve existed.”

Nor did an $8 million transaction in which GAW’s parent company allegedly purchased controlling shares of ZenMiner (another company founded and operated by Garza). “Garza made multiple false statements related to the scheme,” the release states, “to generate business and attract customers and investors.”

The PayCoin collapse initiated the undoing of GAW and ultimately of Garza. GAW tried to bounce back with some unsuccessful endeavors like a crypto exchange called Mineral and a platform for making Amazon purchases called CoinStand, before the company went into default for failing to pay their power bill.

The truth eventually began to come to light after internal emails and documents surfaced, after GAW went under separate investigations by the SEC and the DOJ. A few years later, these investigations have finally resulted in Thursday’s sentence.

Justice and Fraud in CryptoSpace

The sentence is a win for the Department of Justice, which has been puzzling over how to govern the crypto world, and could set precedents for following cases, including investigations already underway.

A Bloomberg study has found that over 80 percent of ICOs are scams. Meanwhile, TechCrunch reports that over 1,000 crypto projects have failed in 2018, and $1.1 billion in cryptocurrencies have been stolen this year, according to CNBC.

The crypto landscape and the justice system clearly have some reckoning to do, but investors need to exercise serious caution in the meantime. Although Garza’s sentence sets a precedent, it’s based on a situation that’s not necessarily unique.

Garza’s Sentence May Not Satisfy Defrauded Victims

Critics of the sentence have pointed out how with good behavior Garza could be out in 18 months, a light load considering his fraudulent acquisitions through PayCoin could’ve totaled $20 million by some estimates, and considering the 20 years of prison time per infraction Garza was facing in court. The lighter sentence was part of a plea deal.

While Garza denied all charges at first, he expressed remorse about his actions in a courtroom statement Thursday, according to CoinDesk. Garza is ordered to report to prison on January 4th, 2019.

Previous ArticleNext Article
I grew up in the Silicon valley under the technological mentorship of Steve Wozniak. I'm a proud member of the Choctaw Nation, I've lived, worked and traveled all over the world, and I now write in the Pacific Northwest.

8 Comments

  1. Generic Cialis Professional Levaquin Purchasing Price With Next Day Delivery Levitra Se Necesita Receta viagra online Photo Levitra Kamagra Stoke On Trent Penacillin Allergy Cephalexin

  2. I think that what you said was actually very logical. But,
    consider this, what if you wrote a catchier post title?
    I am not suggesting your information is not good, however suppose you
    added something that grabbed a person’s attention?
    I mean Defrauding Crypto CEO Josh Garza  Sentenced in Landmark
    Case – The Block Talk is a little plain. You should look at Yahoo’s home
    page and see how they create article headlines to grab people to click.
    You might try adding a video or a picture or two to grab
    people interested about what you’ve written. In my opinion, it might make your posts a little livelier.

  3. Heya! I just wanted to ask if you ever have any trouble with hackers?
    My last blog (wordpress) was hacked and I ended up
    losing a few months of hard work due to no backup. Do you have any solutions to
    protect against hackers?

  4. Thanks for finally talking about >Defrauding Crypto CEO
    Josh Garza  Sentenced in Landmark Case – The Block Talk <Liked it!

  5. I was recommended this website by my cousin. I am not sure whether this
    post is written by him as nobody else know
    such detailed about my problem. You’re incredible! Thanks!

Why Is Everyone Talking About NFTs? Comments Off on Why Is Everyone Talking About NFTs? 51855

In this writer’s opinion the NFT hype is warranted — but not for the reason most people are investing. 

For those who’ve been in the space since Bitcoin’s early surge, you’ll remember the Initial Coin Offering (ICO) boom of 2017. The crowdfunding vehicle, which mirrored an IPO on the public market, brought with it massive amounts of investment into the blockchain space that seemed to mirror Bitcoin’s rapidly increasing value. 

In retrospect, none of it made sense. 

With all the hype, the investment in the space didn’t match due diligence. As of August 2018, investors had lost nearly $100M in ICO exit scams, a major reason we no longer hear about ICOs. 

From there, crowdfunding through token sales was rebranded alongside SEC regulation as Security Token Offerings (STOs). Additional fundraising iterations to enter the scene are Initial DEX Offerings (IDOs) and Initial Exchange Offerings (IEOs).

NFTs are having a similar moment to the immature and potentially reckless ICO market of 2017. The danger can be credited to a mix of hype and a widely unregulated environment with various points of entry and gatekeepers that are not incentivized to shore up fraud. 

As a result, many purchasers of NFTs are falling victim to a spectrum that spans undeserving projects on the mild end and outright scams at the extreme. Meanwhile, hackers are exploiting the unregulated environment. 

Just yesterday, $3 million in NFTs were stolen via an Instagram phishing scam. 

This writer, however, is still bullish on NFTs — just not the ones that are getting all the attention.

NFTs represent a concrete entry-point into the blockchain with a tangible utility and infinite disruptive implications. 

Here are a few.

Digital Assets as Social Proof 

As a Millennial, I personally have a hard time understanding the notion of owning and assigning value to a digital asset, but my kids don’t. 

I’ve written about how Gen Z has already adopted the concept of social proof in digital environments by assigning socially relevant value to digital assets like video game skins. 

As Gen Z ages and becomes an increasingly powerful consumer population, this experience will matter. Whether or not their purchase behavior translates to adulthood remains to be seen, but our kids are already leveraging digital assets in the metaverse to exhibit their position in the social hierarchy in the same way that my generation assigned value to Jansport-brand backpacks. 

Their concept of digital assets will be fundamentally different from ours, and NFTs are likely to benefit. 

But Why Are NFTs Relevant to Me Now?

Social proof is far from the most interesting use case for NFTs. 

In the near-term, NFTs can be utilized to store sale information of physical goods on the blockchain in order to eliminate nefarious actors in fraud-riddled industries like fine wine and art. 

Moreover, NFTs can disrupt any industry with a substantial secondary market. By coding royalties into the smart contract of NFTs, original sellers of wine, art and other trade-susceptible brands and industries can ensure they’ll capture a fee anytime an item is transferred. 

This solves a major problem for creators like photographers, artists and musicians that are notoriously underpaid in comparison to the value they create for brokers. It also has the potential to cut out middlemen like auction houses, record labels, and galleries to democratize the creator economy. 

Other Innovators Have Introduced Creative Use Cases for NFTs

Gary Vaynerchuk utilizes NFTs as tickets for events and other value-adds to his community. Forbes introduced a series of NFT Billionaires that will update alongside the real-time NYSE to gamify their user’s NFT experience in a way that’s brand-relevant. Foxies.art is using a gamified version of NFTs to fundraise blockchain education for women. 

The utility of NFTs is confined only by the imagination of our innovators. Whether or not NFT headlines today will remain relevant is yet to be seen, but one thing is certain: the disruption is only beginning. 

Fidelity to Offer Bitcoin in 401(k) Retirement Plans Comments Off on Fidelity to Offer Bitcoin in 401(k) Retirement Plans 48842

The move is the first for a major retirement plan provider and may signal more widespread adoption of the cryptocurrency. 

On April 26, Fidelity announced its intention to add a Bitcoin investment option to its 401(k) retirement plans. Employees of businesses that pursue the option will be able to allocate as much as 20% of their contributions to Bitcoin, all from the company’s main investment dashboard. According to reporting by the Washington Post, Fidelity said that at least one employer has already signed up for the option which will launch later this year.

“Fidelity’s leadership, especially CEO Abby Johnson, has been at the forefront of institutional Bitcoin and crypto integration for years and is no stranger to the space, with Fidelity’s private equity and venture capital arm being a major source of capital for crypto miners, crypto SPACs, crypto hedge funds and more,” says Eric Lamison-White, Director at STS Capital Group LLC, a cross-border advisory and investment firm. “It is completely in character for Fidelity to steadily and cautiously extend access to their working class customers as the regulatory climate becomes more productive.”

Critics suggest that the volatility of Bitcoin poses an unnecessary risk to a retirement portfolio. It’s a reasonable argument. At the time of this writing, the cryptocurrency’s price has fallen by more than 6% just today. Meanwhile, at $37,978 it’s a far cry from Bitcoin’s high of $68,000, representing more than a 40% drop since November 10th of last year. 

However, advocates of cryptocurrency’s long-term utility disagree.

“Cryptocurrency is a reliable, long-term store of value because it cannot be corrupted by central authorities,” says Lisa Carmen Wang, founder of The Bad Bitch Empire, a platform for female investors in web3. “We’ve already seen hyperinflation, bank failures, and other egregious disasters happen in the last few years, so trust in governments is at an all-time low. Crypto is inevitably volatile now because it is an early stage high-risk/high-reward investment, but for those who believe in the values of a decentralized economy, crypto is an attractive long-term investment that people should consider having in their portfolio.”

Regardless of your appetite for risk, the notion that savers will be able to easily manage contributions to Bitcoin in a respected retirement plan is meaningful.

As of last year, 63% of US adults that did not hold crypto were curious about it. Many people in the crypto-curious category don’t invest because they simply don’t know how. There’s a technological barrier to entry that can feel daunting. 

When you have major retirement plan managers like Fidelity making it easy to add Bitcoin to a portfolio through a dashboard users are already familiar with, we may see this group start investing in the asset class, moving digital currencies further along toward mainstream adoption.

Most Popular Topics

Editor Picks