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It seems the long saga of Josh Garza finally comes to a close. Though he had a legion of followers at one point who swore to death that he was not a scammer, it is now evident that he was, in fact, a scammer, and is now a convicted one. The only hope is that this means there will be no further activity from him, at least not in the cryptocurrency space. He’s had a career of scamming, from the debacle with the telecom company in Vermont to the non-existent Hashlets people were buying and selling feverishly only a few years ago.
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Yes, we must relish the innocence with which some people approached the cryptocurrency space, the type of people that Garza was able to take advantage of. One considers that if these people had invested their monies into more legitimate projects, they might have made handsome profits in the intervening years. Someone who held Litecoin, for instance, through the long hard times of low prices, would by now be rather wealthy. Someone who invested heavily into GAW and held a lot of Paycoin, however, is probably not enjoying the same sort of gains. That’s the point, and it always was, that some of the Garza supporting crowd didn’t seem to understand: they were losing out, and so were projects that actually deserved their attention and, most importantly, money.
Scammers take away from the larger economy not only by siphoning money that would otherwise be spent on good projects but also by disillusioning people who would otherwise remain motivated and help prosper.
Garza’s saga ends with a few paragraphs from the Justice department, who appear to be mostly done with him.
“Between approximately May 2014 and January 2016, GARZA, through GAW, GAW Miners, ZenMiner, and ZenCloud, companies he founded and operated, defrauded victims out of money in connection with the procurement of virtual currency on their behalf. The companies sold miners, access to miners, and the right to purchase a virtual currency called “paycoin,” as well as “hashlets.” A hashlet entitled an investor to a share of the profits that GAW Miners or ZenMiner would purportedly earn by mining virtual currencies using the computers that were maintained in their data centers. In other words, hashlet customers, or investors, were buying the rights to profit from a slice of the computing power owned by GAW Miners and ZenMiner.
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To generate business and attract customers and investors, GARZA made multiple false statements related to the scheme, including stating that GAW Miners’ parent company purchased a controlling stake in ZenMiner for $8 million and that ZenMiner became a division of GAW Miners. In fact, there was no such transaction. GARZA also stated that the hashlets GARZA’s companies sold engaged in the mining of virtual currency. In fact, GARZA’s companies sold more hashlets than was supported by the computing power maintained in their data centers. Stated differently, GARZA’s companies sold the customers the right to more virtual currency than the companies’ computing power could generate. GARZA also stated that the market value of a single paycoin would not fall below $20 per unit because GARZA’s companies had a reserve of $100 million that the companies would use to purchase paycoins to drive up its price. In fact, no such reserve existed.”
Although Garza later denied making such promises regarding the value of Paycoin, there are few who believe he was innocent of such claims. Much like some of our more brazen political leaders of this era, Garza would say anything in the moment in order to promote his cause.
At its heart, Garza’s scam was simple: sell apparently profitable contracts with nothing actually generating the funds for them except new contracts. This is called a Ponzi scheme and it has existed a long time. Paycoin may as well have been called Ponzicoin, as its primary purpose was to funnel new funds into the scam. Plenty of people were hurt in the debacle, and Garza’s eventual facing of justice is well deserved.
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