The Hartford federal court in the U.S. state of Connecticut has sentenced the chief executive officer of crypto firm GAW Miners to 21 months imprisonment on charges of defrauding investors.
On Thursday, the Hartford Business reported that Homero Joshua Garza originally faced 20 years in prison, but his sentence was reduced after the man pleaded guilty on a wire fraud charge in connection with the development and sale of a cryptocurrency called PayCoin.
Garza is expected to start his sentence on January 4, 2019, and will be released in 2021. After his release, he will be expected to undergo supervision for a period of three years which will include a six months of home confinement. He is also expected to fully pay back investors their money, which is approximately $9.2 million. This is in addition to the $9.9 million restitution Garza’s ordered to pay in connection with a separate lawsuit.
Garza founded GAW Miners to sell crypto mining hardware in May 2014. However, the firm eventually ventured into selling cloud-based services to make more money. Investigators said Garza also created a fake cryptocurrency called PayCoin (XPY), and promised investors that the coin and its trading platform PayBase would be integrated with Amazon and major credit card companies to create an XPY debit card. Records show that people invested about $9 million in cryptocurrency.
Garza also promised investors that his cryptocurrency would never fall below the $20 mark as he had arranged to have the prices always above the marked price. He claimed to have PayBase support mechanisms, which included $100 million in company reserves and coordinated price pumps. After investigation, the U.S. Securities and Exchange Commission (SEC) and the FBI revealed that Garza never had any funds reserved for this purposes. The highest price PayCoin reached was $15.92, according to CoinMarketCap data.
According to reports, Garza was able to run his operations with the help of ZenMiners who sold their cloud based services to investors. Garza had also lied to investors that the company had purchased an $8 million stake in ZenMiner. Before authorities caught up with him, Garza had run his operations for a period of nine months.
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