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Crime

FBI announces sentence for multi-million dollar crypto-fraudster

February 11, 2019, 4:53PM EDT

The Federal Bureau of Investigation has announced the sentencing of Homero Joshua Garza, who the bureau said scammed more than $9 million out of investors in his virtual currency, PayCoin.

Garza had pleaded guilty to one count of wire fraud. In addition to paying restitution to his victims, he was sentenced to 21 months in prison followed by three years supervised release, according to the FBI.

The bureau detailed charging documents which contend Garza operated a handful of bitcoin-mining hardware companies in Connecticut between 2014 and 2015, eventually selling shares of his mining operation through a virtual currency called PayCoin. The FBI says Garza made "a series of misleading and false statements about his companies' capabilities, partnership and financial backing" to investors, in a con the bureau likened to a Ponzi scheme.

“Garza got into this market at the right time,” said Special Agent Mark Munster, who investigated the case from the FBI’s field office in New Haven, Conn.

“The interest and enthusiasm for these currencies was high, and he was able to market himself and the business very effectively. The problem was that much of what Garza was marketing was a lie,” a statement that should put many projects and tokens in the space on notice.

According to the bureau, Garza convinced investors to purchase PayCoin by falsely telling them the company had a $100 million financial reserve backing the token, which he had claimed would buoy the price so it “never would fall below $20 per unit.” Garza also fabricated partnerships with companies like Target and Amazon. He also failed to properly register PayCoin before attempting to sell it, and the bottom quickly dropped out.

“It was easy to see where some of the money was going: Garza had a Ferrari, a Lamborghini, and a Maserati. He was definitely caught up in the lifestyle of being a start-up mogul,” said Munster.

As recently as June of last year, the FBI had 130 cryptocurrency-related investigations underway, Bloomberg reported, many centered around drug sales, human trafficking, kidnapping and ransomware attacks. This sentencing is noteworthy because it marks the first time the bureau has made such an announcement with a direct action.