The SEC sought a default judgment against GAW Miners and ZenMiners, two mining companies controlled by Homero Joshua Garza, for over $10 million after neither company responded to its complaint. The a
The SEC sought a default judgment against GAW Miners and ZenMiners, two mining companies controlled by Homero Joshua Garza, for over $10 million after neither company responded to its complaint. The agency released court documents today, first reported by CoinDesk and posted to Scribd.
The SEC filed a memorandum in support of the motion. "Pursuant to Federal Rule of Civil Procedure 55(b)(2), plaintiff Security Exchange Commission ("Commission") respectfully submits this memorandum of law in support of its motion for default judgement against defendants GAW Miners, LLC ("GAW Miners") and ZenMiner, LLC ("ZenMiner"). The Commission seeks a default judgement because GAW Miners and ZenMiner failed to answer or otherwise defend the Commission's complaint against them."
Because neither company filed a response to the SEC's allegations, the agency asked the court to rule against them without a trial or defense presentation.
GAW Miners and ZenMiners both claimed to operate as bitcoin mining companies. Garza, known as Josh Garza, owned and controlled both entities. The SEC alleged that the companies never possessed the mining hardware they marketed to investors and that Garza knew from the beginning they could not generate enough bitcoin to fulfill investor commitments. Rather than run mining operations, the companies took money from new investors and paid earlier investors with those new funds, a classic Ponzi structure.
The SEC did not seek a judgment against Garza himself because he filed for an extension to respond. His companies did not request the same extension, though the SEC documents provide no explanation for this discrepancy.
The agency demanded $10,078,331 in penalties from the two companies. With prejudgment interest included, the total rose to $10,384,099. Under a judgment in the SEC's favor, GAW Miners and ZenMiners would face a permanent ban from conducting any business that violates the Securities Act of 1933 or the Securities Exchange Act of 1934.
Both companies collapsed as Garza proved unable to sustain payments to investors. He subsequently launched Paycoin, an alternative cryptocurrency of his own design, which drew controversy. The SEC complaint does not focus on or address Paycoin.
GAW Miners also faces a separate lawsuit from its electricity provider, which won a default judgment against the company when GAW Miners failed to respond to that suit.
