Homero Joshua Garza masterminded a cryptocurrency scam that cost his clients over $9 million, and now he’s going to prison for 21 months.

The Wild West nature of cryptocurrency is often exhilarating, especially during the massive bull runs of years past. People looked to jump aboard the crypto train and reap substantial financial rewards. Sadly, some scumbags took advantage of this enthusiasm to cheat people out of their hard-earned money, but justice has caught up with one criminal. The man behind a $9 million cryptocurrency scam was recently sentenced to 21 months in prison.

Legit Business Turns into Cryptocurrency Scam

The scammer in question is Homero Joshua Garza, and he operated a number of cryptocurrency-related businesses in Connecticut. What is interesting is that his operation started off as a legitimate enterprise called GAW Miners.

He started off the cryptocurrency mining business in 2014 and sold mining machines to his customers. However, instead of shipping them out to them, he would keep their machine in his company’s data center and mine virtual currencies for them. Later on, he would sell shares, called “hashlets,” of his company’s mining operations.

FBI Special Agent Mark Munster said Garza lucked out with his timing, saying:

Garza got into this market at the right time. The interest and enthusiasm for these currencies was high, and he was able to market himself and the business very effectively. The problem was that much of what Garza was marketing was a lie.

Eventually, Garza created multiple companies (such as ZenMiner and ZenCloud) as well as creating a cryptocurrency called PayCoin. These entities became an outright Ponzi scheme as time went on.

Things Begin to Fall Apart

Business was good in the beginning, but the costs associated with Bitcoin mining and the guaranteed payouts were too much for Garza’s company to bear. He then turned to the tried-and-true method of the Ponzi scheme and began funneling new money coming in to pay off older clients.

The nail in the coffin for Garza was the PayCoin. He failed to properly register the new cryptocurrency, and he lied to investors about the foundation for the coin. He said PayCoin had a $100 million reserve and had partnerships with firms like Amazon and Target. All of these claims were outright lies.

Garza promised that PayCoin would never drop below $20, but the lack of the promised $100 million reserve and no partnerships resulted in the coin plummeting in value. (PayCoin (XPY) is currently trading at $0.006971.) Angry investors filed a complaint with the SEC, who then issued an injunction. This action caught the notice of the FBI, who then began their own investigation based upon the SEC action. Special Agent Munster notes:

We relied heavily on the extensive analysis by the SEC. Then it was a matter of interviewing employees and other investors and following the money trail—looking at what was brought in and what was spent, what was real and what was invented.

The FBI quickly found that Garza had been using the money raised from investors to fund a lavish lifestyle. He had luxury cars (a Lamborghini, a Maserati, and a Ferrari) and took a private jet to Las Vegas where he paid for his employees to party on the Vegas strip. Overall, it’s estimated that his cryptocurrency scam netted over $9 million from his victims.

Garza pleaded guilty to wire fraud and was sentenced to 21 months in prison, to be followed by three years of supervised release. He also has to make restitution to his victims, although Special Agent Munster says it will take a long time for that to happen.

Have you ever fallen victim to a cryptocurrency scam? Let us know in the comments below.

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