[T]he U.S. Securities and Exchange Commission has accused a Brattleboro man of conducting a Ponzi scheme through the façade of a digital currency company.
The federal regulatory agency filed charges against Homero Josh Garza on Tuesday in U.S. District Court in Connecticut. They also charged GAW Miners LLC, which was marketed as a company similar to Bitcoin, and ZenMiner LLC, also called Zen Cloud.
The SEC says 10,000 investors were impacted by the alleged fraud.
Garza, 30, lives in Brattleboro, according to the SEC. He attended Leland and Gray High School in Townshend before living in Massachusetts and Connecticut. During high school, he started a computer repair company called Optima, and eventually started Great Auk Wireless, now called GAW High Speed Internet, and other companies that use the same “GAW” abbreviation.
As of July, Josh Garza had started nearly a dozen companies, and some had expired registrations with the Vermont Secretary of State. His LinkedIn profile page said he had brought many businesses to acquisition, and his Twitter profile said cryptocurrency was his passion. At the time, the state of Vermont was seeking $18,018 in grant money it had paid to GAW High Speed Internet to build out broadband that never came to fruition.
The document filed Tuesday relates to GAW Miners, the cryptocurrency company that has ruffled feathers around the world. The document says Garza and his business partners earned $19 million in revenue from selling investment contracts called “Hashlets.” Investors used those “Hashlets” to share in profits from a type of computing power, the document says. However, the company didn’t have computer power to back up the “vast majority” of Hashlets that were sold, the complaint says.
“Defendants used the lure of quick riches from a twenty-first century system known as virtual currency to defraud investors,” the court document says. “Though cloaked in technological sophistication and jargon, defendants’ fraud was simple at its core — defendants sold what they did not own, and misrepresented the nature of what they were selling.”
“Defendants’ Hashlet sales had many of the hallmarks of a Ponzi scheme,” the document says. “Because defendants sold far more computing power than they owned and dedicated to virtual currency mining, they owed investors a daily return that was larger than any actual return they were making on their limited operations.
“Instead, investors were simply paid back gradually over time, as ‘returns,’ the money that they, and others, had invested,” the document says. “As a result, some investors’ funds were used to make payments to other investors. Most Hashlet investors never recovered the full amount of their investments, and few made a profit.
Tuesday’s complaint serves as official confirmation that the SEC has been conducting an investigation into Garza and GAW Miners. In August, the SEC filed enforcement action against a relative of Garza’s to testify on GAW Miners. In February, a leaked subpoena that spread throughout the Internet showed regulators were looking for Josh Garza.
