Bitcoin mining firm defrauds $20 million in Ponzi scheme

Sina Technology News, Beijing time, December 3, noon news, the U.S. Securities and Exchange Commission (hereinafter referred to as "SEC") said on Tuesday that two Bitcoin mining companies and their founders used the bait of getting rich quickly to defraud investors of $20 million through a Ponzi scheme.

The SEC filed a civil complaint in the U.S. District Court for the District of Connecticut against GAW Miners LLC, ZenMiner LLC and its founder Homero Garza.

Garza's attorney said Garza regretted the decision. No specific information about the two companies could be found.

The SEC said in its complaint that Garza, 30, committed fraud by selling investment agreements called Hashlets that promised to generate profits through bitcoin mining.

The SEC said that Gaza did not actually have enough computing resources to carry out mining, and therefore could not support the investment contracts he sold. Therefore, many investors paid for computing resources that did not exist at all. In addition, the profits that Gaza paid to some investors actually came from other contracts sold later.

Garza and his company sold $20 million in investment contracts to 10,000 investors between August and December 2014, and investors typically purchased the contracts through shopping websites.

“Most Hashlet investors did not receive their full investment, and even fewer experienced a profit,” the SEC said.

The SEC seeks penalties against the defendants and disgorgement of proceeds of the fraud.