Homero Joshua Garza of Brattleboro, Vermont faces federal charges alleging that he operated a Ponzi scheme that bilked thousands of investors. The SEC charged Garza and his two Bitcoin-mining companies, GAW Miners LLC and ZenMiner LLC, with running the scheme. The companies sold $20 million worth of what appeared to be shares in Hashlets, digital mining contracts, from August to December 2014. The Hashlets were advertised as “always profitable and never obsolete” and were sold to over 10,000 investors.

The SEC filed its complaint in U.S. District Court in Connecticut. In the complaint, the SEC defines mining for Bitcoin or other virtual currencies as “applying computer power to try to solve complex equations that verify a group of transactions in that virtual currency. The first computer (or collection of computers) to solve such an equation is awarded new units of that virtual currency.”

The SEC says that the companies oversold the Hashlets, which were created so that investors could have a share of the profits from the companies’ alleged computing powers, and misrepresented critical aspects of the Hashlets to customers.

“Defendants’ Hashlet sales had many of the hallmarks of a Ponzi scheme,” attorneys for the SEC wrote. “Because defendants sold far more computing power than they owned and dedicated to virtual currency mining, they owed investors a daily return that was larger than any actual return they were making on their limited mining operations.”

According to the complaint, the companies repaid investors slowly over time, through fake returns, with funds that they and others had invested.

“As a result, some investors’ funds were used to make payments to other investors. Most Hashlet investors never recovered the full amount of their investments, and few made a profit,” SEC attorneys wrote.

“As alleged in our complaint, Garza and his companies cloaked their scheme in technological sophistication and jargon, but the fraud was simple at its core: they sold what they did not own, misrepresented what they were selling, and robbed one investor to pay another,” Paul G. Levenson, director of the SEC’s Boston regional office, said in a news release statement.

Garza and his companies are charged with fraud in the purchase or sale of securities, fraud in the offer or sale of securities and the offer and sale of unregistered securities.

If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies or complete the contact form.