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The former CEO of a cryptocurrency company was sentenced to a prison term and ordered to pay $ 9 million in restitution due to his company's role in a major Ponzi scheme that cost millions of dollars to hundreds of investors. The hearing comes as the US government and regulators step up their crackdown on cryptocurrency fraud.
A Connecticut District Court judge sentenced Josh Garza, 33, to a 21-month jail term, followed by six months of house arrest for his role in cryptocurrency issuance. called PayCoin. part of the mining profits of another company.
The project was conducted between May 2014 and January 2015 through four Garza-owned companies. These companies sold the rights and access to cryptocurrency mining activities and allowed investors to buy some of these transactions via "PayCoin" and "Hashlets", which claimed to give investors rights over a part of the profits from mining operations.
John Durham, the US district attorney for Connecticut, spoke of the project, saying that "haschet customers, or investors, are buying rights to take advantage of some of the computing power of companies."
Although the transaction appears legitimate in appearance, Garza made several statements that should have triggered an invitation signal to investors, including the guarantee that the price of the virtual currency would not be less than $ 20 per unit. Digital currency reserve of 100 million dollars.
After pleading guilty to defrauding investors and committing fraud, Garza was ordered to fully reimburse all investors who had lost all their investments after finding that the transactions were illegitimate. The judge demanded that Garza pay all investors a total of $ 9,182,000 in restitution and was sentenced to 21 months in prison.
Garza's sentencing comes as US government increases crackdown on cryptocurrency scams
Last week, a New York Federal Judge ruled that the Initial Supply Offerings (ICOs) were part of the offer of securities, opening the door for the closure of the ICO's fraudulent or potentially fraudulent transactions. operations.
The ruling came in a case involving a man who defrauded ICO investors by claiming, and providing falsified evidence, that the virtual currency was physically supported by diamonds and real estate.
Judge Raymond Dearie, the judge in charge of the case, commented on his decision saying that:
"In enacting securities laws, the Congress had the objective of regulating investment in any form whatsoever … Stripped of 21st century jargon, including characterization by the defendant simple scam, filled with the common features of many financial frauds ".
Following this decision, the SEC immediately decided to close and charge two cryptocurrency scams that defrauded investors. The first company charged was TokenLot, a self-proclaimed ICO super-channel, which is responsible for carrying on its activities as an unregistered broker. The TokenLot team fully cooperated with the SEC, which resulted in a small fee.
The second company that was closed by the SEC was a crypto-currency speculative fund, Crypto Asset Management LP, which falsely declared to investors that it was the first fully compliant encryption fund. . The fund's operator, Timothy Enneking, had taken more than $ 3 million from investors and more than 40% of his fund's investments were considered securities by the SEC.
It is likely that the SEC and other US regulators will continue to fight cryptocurrency-related scams in the near future.
Featured image of Shutterstock.
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