SEC Charges Joshua Garza, GAW Miners and Zen Miners With Fraud

The long, torturous and despicable tale of Homero Joshua Garza and GAW Miners is finally coming to an end. Today, the Security Exchange Commission (SEC) announced that they have charged GAW Miners, Zen Miners and their founder, Homero Joshua Garza with two accounts of Fraud relating to the sale of unregistered securities and one count of selling unregistered securities. In the complaint, the SEC alleges that Garza and his companies operated a Ponzi scheme by using new investor money to pay old investors returns.

This news was a long time coming, as the now re branded, previously reported that Garza and his companies were under investigation by the SEC. That was later confirmed by the SEC itself and now we are seeing the results of that investigation.

The SEC alleges that Garza, through his companies, raised $18 million through “Hashlets” that were supposed to be backed up by actual mining hardware. The SEC alleges that the two companies didn’t have nearly enough mining hardware to pay back the returns promised to investors. Instead, they were paid with “returns” that originated from investments of new investors. The SEC also alleges that the vast majority of investors into GAw Miners and Zen miners did not receive a profit from their investment.

“Defendants’ Hashlet sales had many of the hallmarks of a Ponzi scheme. 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 mining operations. Instead, investors were simply paid back gradually over time, as “returns,” the money that they, and others, had invested. 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.”

Before being discontinued, Hashlets were supposed to have an unlimited lifespan and claimed to be “always on, always profitable” but none of those promises ended up being fulfilled. Later in the complaint, they illustrate just how far Garza was willing to oversell his hashlets

“During their first week of availability alone, GAW Miners and ZenMiner oversold — between triple and quadruple — the number of Hashlets for which they had the supporting computing power. Yet, their sales continued.”

The pools the hashlets were supposedly pointed at, apparently confirmed to the SEC that Gaza and his companies never put any hashing power towards them.

We also covered the Garza story, although we focused on his later project, a digital currency called Paycoin that Garza may have been using to extend his Ponzi Scheme when it started to wind down. Paycoin, after promising a $20 price floor and integration with merchants like Target, never came through with any of its promised features and included a hidden one that enabled Garza to print virtually limitless amounts of Paycoin. Paycoin crashed in price and is currently worth less than $0.03. Paycoin is mentioned in the SEC complaint, although it is not a focus, it seems that they came to similar conclusions, indicating that it was done to perpetuate the fraud.

In the section titled “The Hashlet Scheme Unraveled and the Next Scheme Began” the SEC explains the timeline.

“GAW Miners announced, in November 2014, that it was planning to launch a new
form of virtual currency, called PayCoin, and it offered for sale new digital wallets designed to hold PayCoin, called HashStakers. GAW Miners sold HashStakers to new customers, and also offered existing Hashlet investors the chance to “upgrade” their Hashlets to HashStakers [. . .] In offering HashStakers to Hashlet investors, GAW Miners and Garza attempted to prolong their scheme and prevent the collapse of GAW Miners.”

The entire complaint is a fascinating read, a rarity for legal documents. It goes deep into the scheme they allege Garza and his companies perpetuated, including the creation of another company that Garza would later claim to have a partnership with and then later purchase, when he in fact owned the company the entire time.

After Coinfire published the story that GAW Miners were being investigated, Coinfire was subjected to a DDoS attack that many suspected came from someone at GAW. Many GAW and Paycoin supporters publicly doubted the Coinfire story, but today it seems that they have been vindicated. We reached out to Mike Johnson, the original author of the GAW Miners story to gauge his reaction.

“While I am pleased to hear that the SEC has begun a public indictment process it is my hope that the SEC and other agencies currently pursuing criminal and other claims against the companies and Mr. Homero Joshua Garza will help make investors whole once again. I am confident that this and other progressing investigations will ultimately bring those involved with this scheme are brought to justice.”

Interestingly, while it was long suspected that Garza had fled the country, perhaps to Dubai, the SEC complaint indicates that he currently resides in Vermont.

The two cases of fraud while selling unlicensed securities include a maximum five year prison sentence and up to $5 million in fines in addition to restitution for the investors, according to

We reached out to the SEC to seek clarity on what the prosecution would seek, but they would only quote the Prayer For Relief in the SEC’s complaint, which indicates that the commission is looking to disgorge (a legal term for seize) the ill-gotten profits of GAW Miners, along with interest on those gains and fines. It is not clear if Garza will face jail time if convicted. The accompanying press release reads:

“The SEC’s complaint seeks permanent injunctive relief as well as the disgorgement of ill-gotten gains plus prejudgment interest and penalties.”

According to CoinDesk, the SEC is seeking a trial by jury. GAW Miners is also facing civil suits from investors looking to recoup their losses.

We will have more as it breaks. You can read the entire SEC complaint here.

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