U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23885 / July 25, 2017
Securities and Exchange Commission v. Homero Joshua Garza, GAW Miners, LLC, and ZenMiner, LLC, No. 15-cv-01760 (D. Conn. filed Dec. 1, 2015)
United States v. Homero Joshua Garza, No. 17-cr-158 (D. Conn. filed July 20, 2017)
Former Connecticut Resident Pleads Guilty to Criminal Charges in Connection With Digital Bitcoin Mining Fraud
On July 20, 2017, Homero Joshua Garza, a defendant in a pending SEC civil fraud action, pled guilty in federal court in Connecticut to criminal charges in connection with his scheme to defraud investors in a digital bitcoin mining fraud in 2014 and 2015. Garza is currently scheduled to be sentenced in October 2017.
The criminal charge arises largely from the same conduct alleged in the SEC's complaint filed on December 1, 2015. The SEC alleged that GAW Miners and ZenMiner, along with their principal, Garza, purported to offer shares to investors in their digital bitcoin mining operation. Mining for bitcoin or other virtual currencies means applying computer power to try to solve complex equations that verify a group of transactions in that virtual currency. The first computer or collection of computers to solve an equation is awarded new units of that virtual currency. According to the SEC's complaint, 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 paid to some investors came, not from successful mining activity, but from proceeds generated from sales to other investors.
On June 2, 2017, the court entered a final judgment against GAW Miners and ZenMiner, permanently enjoining each of them from violating Sections 5(a) and 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, ordering each entity to pay, jointly and severally, approximately $10 million in disgorgement and prejudgment interest, and a civil penalty of $1 million each. Both GAW Miners and ZenMiner have ceased their former business operations.
The SEC's litigation continues against Garza.