Crypto Crime Weekly: Mining Firm Fraudster Gets Jail Time
09.14.2018

Justice is served to a sketchy CEO in this week’s roundup of the most compelling cryptocurrency-related crime stories from around the web.

Crypto Mining CEO Sentenced to Prison for Wire Fraud
Yesterday, Josh Garza, CEO of the now-defunct crypto mining company GAW Miners, was sentenced to 21 months in prison for wire fraud. The 33-year-old Texan pleaded guilty to one federal charge last year. GAW, which disintegrated in 2015, was an alleged Ponzi scheme, selling more mining processing power than the company actually had. In late 2014, GAW launched its own cryptocurrency, PayCoin, which Garza at the time predicted “will be established as the new dominant global online currency.” As you may have guessed, PayCoin did not get established as the new dominant global online currency. It tanked spectacularly, despite supposedly having a price “floor” at $20. Garza will have to pay restitution for the $9.18 million he defrauded from hundreds of people around the globe. [CoinDesk]

Dark Web Bazaar AlphaBay Sued in Teen’s Drug Death
The parents of Grant Seaver, a Park City, Utah, teen who died in September 2016 after taking a synthetic opioid known as “pink,” have filed a lawsuit blaming his death on AlphaBay, the dark web bazaar where the drug allegedly was procured. Seaver and his friend Ryan Ainsworth, both 13, died within days of each other after taking the drug, which came from China. James and Deborah Seaver are seeking damages of more than $10 million against the estate of Alexandre Cazes, the late founder of the now-defunct AlphaBay; the Tor Project, which makes software that enables access to the dark web; and the postal services China Postal Express & Logistics Company and Express Mail Service. The suit claims the defendants knew that pink was “so unreasonably dangerous that ingestion of almost any amount could cause death.” [ParkRecord.com]

ICOs Covered by Securities Law, Judge Rules
In what was seen as a big win for the government, a federal judge on Tuesday ruled that U.S. securities laws may cover an ICO. The ruling came in the case of Brooklyn businessman Maksim Zaslavskiy, charged with conspiracy and two counts of securities fraud for allegedly defrauding investors via two super-iffy-sounding coins, REcoin and DRCWorld, supposedly backed by investments in real estate and diamonds. The defense had argued that the ICOs were currencies, not securities, and that securities law was too vague to be applied to ICOs. “Per the indictment, no diamonds or real estate, or any coins, tokens, or currency of any imaginable sort, ever existed—despite promises made to investors to the contrary,” U.S. District Judge Raymond Dearie said in his ruling. “Simply labeling an investment opportunity as a ‘virtual currency’ or ‘cryptocurrency’ does not transform an investment contract—a security—into a currency.” This seems like as good a time as any to read up on how to avoid ICO scams. [Bloomberg]