SEC Seeks $10 Million Default Judgment Against GAW Miners
The Securities and Exchange Commission is seeking more than $10 million from the cryptocurrency mining firms GAW Miners and ZenMiner.
The Securities and Exchange Commission (SEC) is seeking more than $10m from the cryptocurrency mining firms GAW Miners and ZenMiner in connection with its ongoing securities fraud suit.
The agency filed suit against the firms and former CEO Homero Josh Garza in December. The SEC sought a motion for entry of default against the firms last month.
Garza and the companies are accused of defrauding investors, and operating a Ponzi scheme in connection with its now-defunct mining service by selling more mining power than it actually possessed.
The SEC argued in its motion for default judgment, filed on 12th February, that Hashlets – mining contracts sold by GAW in 2014 through an internal market it maintained – constitute securities under the Securities Act and Exchange Act.
The filing states:
The agency further alleged that GAW and ZenMiner made material misrepresentations to its customers, resulting in more than $19m in revenue tied to the sale of Hashlets. These sales, the SEC said, were buoyed by public statements made by Garza.
"In addition, GAW Miners obtained money, in the form of additional Hashlet investments, as a result of public statements made by its CEO that the company knew or should have known were false," the agency said.
Notably, the SEC did not name Garza as one of the parties in the filing, in light of a recent court approval for an extension of time to response to the suit.
Marjorie Peerce, the defense attorney representing Garza, did not immediately respond to a request for comment.
Collapse fallout continues
GAW Miners collapsed last spring amid the market decline of its alternative cryptocurrency, paycoin, and growing scrutiny of its business practices.
At the time, the firm was sued by a Mississippi electrical utility that provided power to its mining operation in the state, a suit that ultimately resulted in a default judgment after GAW and Garza failed to respond.
Details of the SEC's investigation of GAW were first reported by bitcoin news blog Coin Fire. The company denied the existence of the suit, but information was disclosed following the release of GAW staff emails and, later, a lawsuit filed by the agency against Garza’s brother, who acted in a senior sales capacity for the company.
The full motion for default judgment can be found below:
Image via Shutterstock
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.