SEC Charges Bitcoin Mining Companies

SEC Charges Bitcoin Mining Companies


Washington D.C., Dec. 1, 2015 &mdash,

The Securities and Exchange Commission today charged two Bitcoin mining companies and their founder with conducting a Ponzi scheme that used the lure of quick riches from virtual currency to defraud investors.

According to the SEC&rsquo,s complaint filed ter federal court ter Connecticut, &ldquo,mining&rdquo, for Bitcoin or other virtual currencies means applying rekentuig power to attempt to solve complicated equations that verify a group of transactions te that virtual currency. The very first rekentuig or collection of computers to solve an equation is awarded fresh units of that virtual currency.

The SEC alleges that Homero Joshua Garza perpetrated the fraud through his Connecticut-based companies GAW Miners and ZenMiner by purporting to suggest shares of a digital Bitcoin mining operation. Te reality, GAW Miners and ZenMiner did not own enough computing power for the mining it promised to conduct, so most investors paid for a share of computing power that never existed. Comebacks paid to some investors came from proceeds generated from sales to other investors.

&ldquo,Spil alleged te our complaint, Garza and his companies cloaked their scheme te technological sophistication and vaktaal, but the fraud wasgoed elementary at its core: they sold what they did not own, misrepresented what they were selling, and robbed one investor to pay another,&rdquo, said Paul G. Levenson, Director of the SEC&rsquo,s Boston Regional Office.

According to the SEC&rsquo,s complaint:

  • From August 2014 to December 2014, Garza and his companies sold $20 million worth of purported shares ter a digital mining contract they called a Hashlet.
  • More than Ten,000 investors purchased Hashlets, which were touted spil always profitable and never obsolete.
  • Albeit Hashlets were depicted te GAW Miners&rsquo, marketing materials spil a physical product or lump of mining hardware, the promised contract purportedly entitled the investor to control a share of computing power that GAW Miners claimed to own and operate.
  • Investors were misled to believe they would share ter comes back earned by the Bitcoin mining activities when te reality GAW Miners directed little or no computing power toward any mining activity.
  • Because Garza and his companies sold far more computing power than they possessed, they owed investors a daily terugwedstrijd that wasgoed larger than any actual terugwedstrijd they were making on their limited mining operations.
  • Therefore, investors were simply paid back step by step overheen time under the mantra of &ldquo,comes back&rdquo, out of funds that Garza and his companies collected from other investors.
  • Most Hashlet investors never recovered the total amount of their investments, and few made a profit.

The SEC&rsquo,s complaint seeks voortdurend injunctive ease spil well spil the disgorgement of ill-gotten gains plus prejudgment rente and penalties.

The SEC&rsquo,s investigation wasgoed conducted by Gretchen Lundgren, Kathleen Shields, Trevor Donelan, and Michele T. Perillo of the Boston office, with assistance from Alex Lefferts of the Enforcement Division&rsquo,s Center for Risk and Quantitative Analytics. The SEC&rsquo,s litigation is being treated by Ms. Shields and Ms. Lundgren.

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