Home / / Bitcoin mining con netted $20m

Bitcoin mining con netted $20m

US conman fined for ponzi scheme that promised profit from bitcoin mining companies

Bitcoin mining con netted $20m
The bitcoin scheme promised profits based on bitcoin mining, but was not backed up with the processing necessary to generate the profits.

A conman in the US stole more than $20m in a bitcoin mining scam has been fined by the Securities & Exchange Commission (SEC).

The fraudster, Homero Joshua Garza, told investors into two companies that he was building powerful computers to mine bitcoins.

Bitcoin mining is the process whereby computers participating in a shared process to solve bitcoin algorithms, called hashes, which are part of the verification process of bitcoin transactions. Once a set block of hashes is solved, a set amount of new bitcoins are shared among the participating computing systems.

As the value of bitcoin has climbed in recent years, and the frequency at which new bitcoins are issued has decreased, so computing enthusiasts and investors have created ever more powerful custom computers dedicated to solving the algorithms and generating bitcoins.

The SEC investigation found that the two companies, GAW Miners and ZenMiner, had nothing like the computing power necessary to generate the promised volume of bitcoins, and in fact Garza was simply running a Ponzi scheme with new investors' money being used to pay older investors.

Around 10,000 people invested in the companies, very few of whom were able to recover their money. Garza was fined $12m by the SEC.

Follow us to get the most comprehensive technology news in UAE delivered fresh from our social media accounts on Facebook, Twitter, Youtube, and listen to our Weekly Podcast. Click here to sign up for our weekly newsletter on curated technology news in the Middle East and Worldwide.

REGISTER NOW | Webinar Event | Security you can bank on – Safeguarding the Middle East’s financial sector

Presented in partnership with security and network specialist Cybereason, the second in the three part webinar series will bring together a panel of experts to discuss how banks and financial institutions are evolving their service offering while simultaneously staying one step ahead of the cyber criminals who seek to bring their operations crashing to the ground.