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The former CEO of a virtual money company is going to jail and must pay more than $ 9 million in compensation for his role in the so-called generation and sale of virtual currency from his businesses that have become a Ponzi scheme.
Josh Garza, 33, formerly of Somers, Connecticut, was sentenced to 21 months in Hartford District Court, followed by three years of probation, of which he will have to spend the first six months in the regime. millions of dollars.
According to court documents and court declarations, "virtual money" is a numerical representation of a value that can be exchanged and used as a medium of exchange. The virtual currency is not generally issued or guaranteed by a jurisdiction or government, and its value is decided by consensus within the community of virtual currency users.
A virtual currency usually automatically generates currency units through a process called "extraction". A virtual currency "currency" is a computer hardware that runs special computer software to solve complex algorithms validating groups of transactions in that virtual currency. Once a complex algorithm is resolved, a currency unit, such as a bitcoin, is assigned to the person who exploits the minor. This process is called "mining".
Between May 2014 and January 2015, through four companies that he created and operated, Garza defrauded his victims through the money associated with the purchase of virtual currency on their behalf. The companies sold minors, access to minors and the right to buy a virtual currency called "PayCoin", as well as "hashlets", which gave entitlement to a share of the profits that the companies would have earned.
According to John Durham, the US District Attorney for Connecticut, "haschet customers, or investors, were buying rights to take advantage of some of the computing power of companies."
In an effort to generate business, Garza made numerous misrepresentations related to the project, exaggerating their value and claiming to hold an $ 8 million stake in a parent company. In the end, Garza's companies sold more hashets than the computing power of their data centers. Its companies eventually sold to customers the right to transfer more virtual currency than the computing power of the companies could generate.
Garza also stated that the market value of a single "PayCoin" would not be less than $ 20 per unit because its companies had a $ 100 million reserve that could be used to purchase PayCoins to raise the price. No such reserve has ever existed.
During the operation, Garza, through the intermediary of his companies, used the money generated by new investors to pay older investors. In total, Garza has defrauded hundreds of people out of a total of $ 9,182,000, which he was sentenced to pay back by a judge. On July 20, Garza pleaded guilty to one count of electronic fraud. Garza remains on bail and must report to prison on 4 January to begin his stay behind bars.
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