The U.S. District Court has issued a final judgement against two Connecticut-based bitcoin mining companies, ruling that each was run as a Ponzi scheme.

GAW Miners and ZenMiner must each pay $10.3 million in disgorgement and prejudgment interest, in addition to a civil penalty of $1 million.

Both GAW Miners and ZenMiner were founded by Homero Joshua Garza. Through the two businesses, Garza offered investors shares in a bitcoin mining operation. However, the actual computing power that was supposed to be dedicated to bitcoin mining never actually existed, and investors were paid returns generated from sales to later investors.

The original complaint, filed by the SEC in 2015, alleged that the two companies have defrauded over 10,000 investors who believed they were purchasing a share of a legal bitcoin mining operation. GAW Miners and ZenMiner generated $19 million in the sale of ‘Hashlets’, their term for the portion of hashing power the investors had purchased. In reality, the companies never possessed the computing power they had sold to investors.

Not only did Garza, and the companies he founded, misrepresent the amount of computing power they possessed, they also knowingly falsified how payouts would be derived, the profitability and life-span of a Hashlet, and the extent of the companies’ mining activities.

On May 29, 2017, the U.S. District Court of Connecticut ruled that the SEC established liability and supported its requests for disgorgement, relief and civil penalties. The amounts were then determined and issued with the final judgement.

According to the litigation release, the SEC is still pursuing litigation against Garza himself.

When the SEC initially began interviewing witnesses associated with GAW Miners, prior to filing suit against the company, they called in Garza’s brother Carlos, who worked as a salesperson at GAW Miners. When testifying under oath, Carlos Garza refused to answer questions directed toward him by representatives of the SEC not due to any procedural requirement or claim to privilege, but because he was frightened. In fact, during a single questioning period, Garza said that he was ‘scared’ or ‘frightened’ a total of sixty-eight times, and therefore could not comply with requests for information. The SEC determined that fear was not an appropriate reason to refuse to comply and successfully petitioned a Massachusetts court to order Garza to reappear and to answer the questions put to him.