Editorial Disclosure: While Coin Fire was awaiting additional source confirmation, Coin Brief also received emails between Mr. Garza and his legal counsel and has published a feature regarding their contents. Coin Brief is an independent publication unrelated to Coin Fire.

On January 19th, Coin Fire exclusively brought you information regarding a Securities and Exchange Commission investigation against GAW Miners and Josh Garza. The documents provided solely to Coin Fire from vetted and confirmed Commission employees detailed an on-going and active investigation against the company, several investors, affiliates, and Mr. Garza.

Mr. Garza denied the investigation allegations with the company publishing a public blog post stating that the Coin Fire “allegations” were false. The blog post, written by company representatives and reviewed by their attorneys, stated,

Coin Fire Allegations About PayBase Are False PayBase has investigated these spurious allegations and confirmed that they are false. “We were stunned by the allegations which served to negatively impact our business in this exciting and evolving financial category,” said Josh Garza, CEO of GAW. “However, we appreciate the outpouring of support by a community that is behind what we are doing as pioneers in the cryptocurrency market; in short, they simply didn’t believe it.” PayBase is in the process of reviewing its options at this time including what, if any, legal action may be appropriate in response to the Coin Fire article.

The company has since been working with Manatt, Phelps and Phillips to discuss pursuing additional legal action against Coin Fire for publishing the documents they felt were damaging to their reputation. According to the blog post published by the company, GAW Miners stated that the Coin Fire SEC investigation documents were false and that the company was not under an active investigation.

New details have emerged, however, that indicate both Mr. Garza and his attorneys have been aware of the investigation. Mr. Garza and his attorneys were also aware of the investigation prior to their “Coin Fire Allegations About PayBase Are False” blog post and have been determining how to properly handle the situation.

A collection of emails exchanged between Mr. Garza, Carol Van Cleef–an attorney at Manatt, Phelps, and Phillips–and Mr. Garza’s attorney, David McLain, reveal that the company chose to release a false statement denouncing both the investigation and Coin Fire’s article after receiving the information corroborating previous Coin Fire reports.

In an email to Mr. Garza, later shown to several prominent Hashtalk members via private messages on the community forums, Ms. Cleef stated,

[…] the repurchase language should not appear on this release or it will invite the attention of the SEC more rapidly than we would like.

Another email exchange between Mr. Garza and Mr. McLain further stated,

[…] how to proceed […] based on the rapidly changing environment including the fact that the SEC has recently started an open inquiry of GAW, you, etc

These emails have been obtained by a Coin Fire editor from six different sources. These emails had been shown to several prominent members of Hashtalk via Mr. Garza in an attempt to explain the delay behind the PayCoin Honor Program initially set to launch on February 1st.

Mr. Garza promised that the company would begin repurchasing PayCoin at a value of $20 per coin over the next several years in an “honor program” that would begin enrollment on February 1st. On the day of initial enrollment and in the final business hours of the day, Mr. Garza and the company released a post on the PayBase blog titled Status of Honor Program. The post read,

As previously reported, we are reviewing with counsel the features of the Honors Program and what if any aspects of the program may require regulatory approval. We intend to proceed based upon advise of counsel and will provide updates as developments warrant.

The Honors Program delay came as a blow to many in the Hashtalk community and to those who had been holding on to the virtual currency XPY with the hopes of a repurchase at the previously promised $20 rate. Based on the email exchanges between legal counsel and Mr. Garza, it appears that the Honors Program was delayed due to SEC concerns and could be cancelled altogether. Mr. Garza stated in emails to his attorneys,

[…] I was advised by our legal team to run this program. I have been left out of many other legal meetings, and now being told we might not even do the program.

Ms. Van Cleef represented the Digital Chamber of Commerce just a few short weeks ago and released this statement regarding the Chamber’s opinion on Mr. Garza and GAW Miners,

“Josh Garza is not a member of the Chamber, and the Chamber has never accepted any donation or other funding or support from him. The fact that the Chamber is sponsoring the AML Compliance Boot Camp for Digital Currency in conjunction with the Miami BTC conference does not in any way imply any association with or endorsement of Mr. Garza’s appearance at the Conference. Likewise Ms. Boring’s participation in the conference is not an endorsement of and does not in any way imply any association with Mr. Garza or his companies. Please note that, as a general policy, the Chamber makes every effort to ensure that its members are of the highest integrity and subjects any company or individual that applies for membership in the Chamber to a rigorous vetting process that includes peer review. No exceptions are made to this policy.”

Mr. Garza was previously represented by Mr. Brian Kline, an attorney from the Bitcoin Foundation, but is now being represented by Ms. Van Cleef. Ms. Van Cleef initially denied her involvement with Mr. Garza to Mr. Scott Booth of SGB Enterprises. In an email to Coin Fire, Mr. Booth stated,

I flat out asked her if she was representing Garza *OR* any of his business ventures and she could not and would not answer THAT portion of my questioning citing her firm’s business confidentially policy, which in itself speaks volumes.

Ms. Van Cleef is a prominent attorney heavily involved with the Digital Chamber of Commerce, an organization Coin Fire has previously published reports about on numerous occasions. This is now the second organization currently claiming to represent bitcoin while members have been found being intimately involved with GAW Miners and Mr. Garza’s operations. Mr. Garza has employed Ms. Van Cleef and her firm to represent PayBase as it attempts to navigate the current regulatory climate.

The emails provided did reinforce Mr. Garza’s previous public statements that Manatt, Phelps, and Phillips are the new legal representation of the company–a fact that had not been verified prior to these emails being shared with members of Hashtalk.

Coin Fire will continue to update this story as our editors receive additional information.

This post and series is the result of the work of Leo, Mike, and Christina from the Coin Fire team.



Image provided by Scott S.