Josh Garza, the ex-CEO of PayCoin, has been locked behind bars and fined $9 million in connection with his firm’s role in a big Ponzi scheme, which saw many investors lose their investments. The judgment has been made at a time when the U.S authorities and SEC tighten their effort on crypto-related fraud.

The sentence that was made by a District Court Judge will be accompanied by a half a year house arrest.

Details of the Ponzi Scheme

The fraud was carried out between May 2014 and January 2015by four establishments managed by Garza. These establishments auctioned the rights and access to crypto mining activities and permitted investors to own a section of these activities via “PayCoin” and “Haslets” that alleged to offer investors the privileges to a section of the gains from the mining activities.

John Durham, the US District Attorney for Connecticut said that “haslet customers, or investors, were buying the rights to profit from a slice of the computing power owned by the companies.”

Though the undertakings literally appear legitimate, Garza made numerous allegations that ought to have raised red flags for stakeholders, comprising the warrant that the value of the cryptocurrency would not decline below $20 per unit since the firm would prop the value using their $100 million cryptocurrency reserve.

Other Crypto Related Legal News

In last week, a New York Federal judge ruled that Initial Coin Offering (ICOs) are categorized as security offerings, prompting the Securities and Exchange Commission (SEC) to embark on closing fraudulent ICO activities.

The ruling was made in a lawsuit involving a complainant who had deceived ICO stakeholders by alleging, and presenting untruthful evidence, that the cryptocurrency was physically supported by diamonds and real estate.

Already, SEC has closed and sued two digital currency projects that were swindling stakeholders. TokenLot, a self-described ICO superstore, was the first to be charged with functioning as an unregistered broker-dealer.

Another company that has been closed by SEC is a crypto hedge fund- Crypto asset Management LP- which had deceptively told investors that it was the initial a fully regulatory acquiescent cryptocurrency hedge fund.

It is expected that the SEC and other regulatory agencies in the United States will continue to cap crypto-related frauds in the coming days.