In a statement released Monday, the SEC announced that it has reached a sum and conclusion on its first successful case against Josh Garza, GAW Miners, and ZenMiners.
The final judgement […] orders each of them to pay, jointly and severally, $10,384,099 in disgorgement and prejudgment interest. The final judgment also requires each entity to pay a civil penalty of $1,000,000. Both GAW Miners and ZenMiner have ceased their former business operations.
This announcement came on the same day that the Supreme Court made a ruling regarding lower courts and disgorgements, saying that such tactics must be used by SEC within a five year statute of limitations. The rule does not affect the case of Garza, but makes it more pertinent to seek prosecution of scammers as soon as possible in the US, because just recompense is the primary goal when going after them, and now the ability of the government to mete out such repayments is going to be limited moving forward.
The release doesn’t make it clear what other areas of Garza’s operations they will still be poking into, but one thing that could definitely come up is Paycoin. The SEC will have a lot of purview in prosecuting the conduct of the Paycoin project if it can get a judge to agree that Paycoin is a security. Unfortunately for the rest of the cryptocurrency world, this could bring renewed and increased interest from that and other federal agencies into cryptocurrencies. Increasingly people have come out from the shadows when operating on these projects, and the liability created by the Garza case makes the future appear less certain.
The fraudulent activities of Josh Garza are well known to the Bitcoin world, and the selling of “hashlets” was only really the zenith, and probably most successful, of his efforts. The SEC says in this statement that their litigation will continue, and while they are unclear, it seems evident that their aim is to ensure that no one is silly enough to conduct the same level of fraud. But that type of fraud is still very possible, and moreover, easier to conduct from outside the United States, and so we must take these opportunities to ask ourselves how this thing got so far.
There were people calling BS on Garza and GAW from very early on. It didn’t take long for the community to discover his previous bad dealings in Vermont, where his company had bilked a town of thousands of dollars. There were some people paid to defend Garza in comments sections and on social media, but for the most part, people fell for the con and simply refused to believe it could be so. Many of these people are still in the cryptocurrency space, but many others left for good. Those that remain, they are the ones who have the most to learn, especially now that many of them will be getting their money back.
But what really led them to continue supporting Garza, even as the seams began to tear and we could all see what was really going on? Was it vanity, the refusal to believe they had been wrong about this guy? Was it collective hallucination that the markets would simply defy gravity and deliver their promised $20 per coin?
The truth is we’ll never know, but we can hope that those who are vulnerable to the tactics of the Garzas of the world, in the future, are willing to listen to those who are not.
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