You must have heard of Bitcoin and how in recent days it has made some early investors millionaire overnight.
Yes, the Bitcoin boom is back, and it's real — a digital currency that has just crossed a new milestone today. The current price of 1 BTC or 1 Bitcoin = US$2,850.
An American con man took advantage of this boom in Bitcoin market to run bogus bitcoin mining schemes and earn millions of dollars.
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But the bogus schemes ended as the United States Securities and Exchange Commission (SEC) has won a legal battle against two bogus, but now defunct, Bitcoin companies operated by Homero Joshua Garza — GAW Miners and ZenMiner.
Garza is now facing a $12 Million (£9.2 Million) penalty for running the bogus schemes – what lawmakers have certified was a "Ponzi scheme."
According to the SEC, Garza used the "lure of quick riches" in order to get people to invest in the bitcoin mining schemes, which means those who add their computing power to help verify transactions, a practice known as mining, are rewarded with Bitcoins.
Garza's GAW Miners and ZenMiner purported to provide shares in cloud-based Bitcoin mining machinery, but nothing like that was ever built by the operator.
Garza told investors that he had enough computing power to mine a lot of bitcoins on their behalf and share the proceeds, but in reality, he just used cash from new investors to reward earlier joiners, which is nothing but a fraudulent "ponzi" scheme, according to the SEC.
The SEC said: "Most investors paid for a share of computing power that never existed." It also said that about 10,000 investors joined the bogus schemes and handed over $20 Million to Garza.
Few got back their money they invested, but many left without a single penny.
The complaint against the Bitcoin mining schemes was filed on 1 December 2015, and on June 2, the US District of Connecticut federal court sided with the SEC, ordering both GAW Miners and ZenMiner to pay a combined of $10,384,099 in disgorgement and prejudgment interest, along with $1,000,000 in damages.
Both GAW Miners and ZenMiner companies have now been shut down.
However, a ruling is yet to be made on the Bitcoin funds collected by Garza. In 2014, when Garza was running the bogus schemes from his home in Connecticut, 1 BTC was equal to $450, and today it is around $2,800.
So, the $20 Million funds Garza took from the investors today worth around $150 million.