Josh Garza, the ex-CEO of PayCoin has been sentenced to 21 months of prison, followed by 6 months of house arrest. Furthermore, he is also ordered by the Judge to pay $9 million in compensation for the damages. This news comes following the strict crackdown by the US government on ICO and crypto-based frauds.
The 33-year-old Josh Garza was the main accomplice in a Ponzi scheme circulating around the PayCoin cryptocurrency. The company had promised investors a part of profits obtained by crypto mining.
The scheme in question was carried out between May 2014 and January 2015 using four companies that were owned by the convict. On the business front, these companies offered right to cryptocurrency mining operations by selling the rights to a part of these mining profits.
“Hashlet customers, or investors, were buying the rights to profit from a slice of the computing power owned by the companies.”
The company’s business seemed legit at first. But it was due to the get-rich-quick mentality of the investors that Josh was able to pull off this scheme. There were plenty of instances which should have raised concerns among investors. The company guaranteed that the value of their cryptocurrency would not drop below $20. Additionally, the company promised that if it falls below this price, they will be investing their own money. This money would be $100 million digital currency reserve that the company claimed to maintain.
In the end, Josh pleaded guilty for this crimes and admitted having conducted wire fraud. He has been ordered to pay complete damages back to the investors for the loss of their investments. Josh has been ordered to pay $9,182,000 back to the investors and he is sentenced to 21 months in jail.
The SEC Takes Charge of Crypto
Last week, a New York Judge had established that Initial Coin Offerings (ICOs) are considered securities. This has allowed the Securities and Exchange Commission (SEC) to track down and close fraudulent ICO operations.
It’s great to see that the US government is taking steps to protect investors from the pitfalls of the unregulated crypto market.