It’s been a long time since we’ve heard much from Josh Garza. At last glance, he was facing charges of fraud from the Securities and Exchange Commission and much of his army of GAWesome supporters had gone silent. The SEC case continues, and earlier this month Garza finally responded to the charges with a long-winded “pleading of the fifth.” This response to the allegations comes after numerous requests to delay the case, the contents of which are mostly sealed.
“Accordingly, on the advice of counsel, Defendant respectfully declines to answer the allegations set forth in the Complain, based on his rights under the Fifth Amendment to the United States Constitution.”
At the end of the filing, however:
Defendant reserves the right to amend this Answer upon the resolution of any criminal investigation or related proceedings.
This last bit is clearly intended to allow Garza a chance to later plead out of the case while giving away nothing at present.
The case has largely fallen off the radar of cryptocurrency enthusiasts, who’ve become more engrossed in the various aspects of Bitcoin’s block size debate as well as the stellar growth in the price of Bitcoin which have both happened during the intervening months.
For this reason, this writer, who covered the scandal in depth culminating in a full-scale rebuke of the dozens of individuals who consciously defended Garza’s every move up until the bitter end, will quickly give the reader the rundown of the GAW Miners Hashlet scam.
- GAW Miners began as a hardware provider. Their hardware was largely rebranded Chinese equipment, but at this time they were at least delivering tangible products.
- In August of 2014, GAW began selling “hashlets,” or virtual mining contracts. According to the SEC, Garza and his cohorts knowingly falsified claims in regards to said hashlets and their actual return-on-investment. Additionally, GAW faces an ongoing lawsuit in Mississippi for unpaid electrical bills. Like nearly all virtual mining, Hashlets would later prove to be not just unprofitable but for many, a total loss.
- According to the SEC, at least 10,000 users were fooled out of bitcoins.
- Around December, 2014, Paycoin (XPY) was launched. Paycoin was a poorly modified fork of Peercoin which had the added feature of “prime nodes” which would receive insane interest payments. These prime nodes were issued primarily to members of GAW Miners as well as a few loyal community members. During the run-up to launch, Garza touted that Paycoin would sell for $20 per coin. Later, Paybase, a related effort, offered a “repurchase” program which never actually happened. Today, the totality of Paycoin, which was eventually taken over by its disparate community, has a value of around 25 bitcoins. Were it to be actually worth $20 per coin, this net worth would actually be closer $233M, or 233,000 BTC.
- The amplification of the scandal surrounding Paycoin coincided with the failure of its primary, most vocally supportive exchange, Cryptsy. Up until that time, Cryptsy was one of the largest trading platforms for alternative cryptocurrencies. While ShapeShift.io quickly delisted Paycoin after “fraud concerns,” Cryptsy listed the currency until its last gasp. It is important to note that Cryptsy was an owner of a prime node. Pseudonymous CCN writer Hiro Nakamura cautioned Cryptsy to get away from Paycoin, to no avail. Thus far there has never been a linkage of the Paycoin scandal and the exit scam of Cryptsy, but the two happened with such coincidence that it is hard not to draw a straight line.
At CCN, our memory is long and we look forward to soon reporting on the outcome of Garza’s SEC trial. There is not much that can be done for those who were repeatedly warned against doing business with anything Garza touched, but we can help to ensure that no future cryptocurrency project fomented by him or his cohorts goes unnoticed.
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