Another attempted Bitcoin scheme was interrupted, and the responsible party, Homero Joshua Garza is now being sued for fraud.
The founder of ZenMiner and GAW Miner, Homero Joshua Garza, was caught mining for bitcoin and sued by the Securities and Exchange Commission (SEC). A civil complaint accused Garza and his brother (Carlos Garza) of mining bitcoin and committing a fraud worth over $10 million.
Thanks to criminal activities like this, Bitcoin’s reputation continues to suggest that it’s only used in criminal business. The truth of the matter is that this cryptocurrency is popular among criminals due to the fact that it’s hard to track, but that doesn’t change much.
The idea of the US dealer was to try and create an investment plan and give the participants the ability to mine Bitcoin. However, according to the government, his mining offers were fraudulent, and misrepresented the amount of return on investment that would have been received by mining.
Investopedia claims that mining bitcoin leads to releasing new coins, but it also adds transactions to the block chain. The process itself is done by compiling multiple transactions into blocks. Miners would then basically try to solve a pretty difficult puzzle, and the first one that manages to do it can place the next block on the chain and get a reward.
These rewards include the newly mined coins, as well as the transaction fees that are, once again, paid in Bitcoin. Basically, those who were involved in the scam were renting the tech that’s needed for verifying transactions. And eventually, they managed to earn a few of the Bitcoin as well. After the authorities discovered the operation, they not only confirmed that the equipment was flawed, but also that the scammers were aware of it.
“GAW Miners and ZenMiner did not own enough computing power for the mining they promised to conduct, so most investors paid for a share of computing power that never existed. Returns allegedly paid to some investors came from proceeds generated from sales to other investors.”
Garza used the money received from his investors to pay back his previous investors. This is called a Ponzi scheme. In the process, he managed to keep around $20 million, while the investors didn’t manage to get the full amount of invested money back. The SEC has stated that Garza didn’t work with anywhere close to the amount that’s needed to properly mine Bitcoin.
Basically, the entire business wasn’t good enough to produce enough money for him to return the investments. Now he must pay the fine to make up for the damage, and he also faces a trial for the fraud that he committed.
If you liked this article, follow us on Twitter @themerklenews and make sure to subscribe to our newsletter to receive the latest bitcoin, cryptocurrency, and technology news.
