Crypto Scams Like Pay Coin: Will You Be Their Next Victim? | Medium
Cryptocurrencies, despite ushering in an exciting new era of financial liberty and empowerment, also facilitate the proliferation of brazen-faced scams like Pay Coin. This is hardly surprising; fraudsters are drawn to new technologies and the crypto industry is still quite new.
Despite providing tools that foster true innovation, the freedom of the crypto industry also creates room for persuasive opportunists to tout scams like failed cryptocurrencies to unsuspecting newbies. One such mischevious opportunist is Homero Joshua Garza, the CEO of GAW (aka Genius At Work) Miners LLC and director-in-chief of the Pay Coin scam operation.
Enabled by the naivety of early crypto investors and the glut of unverified information in 2014, Garza and others at Pay Coin Foundation swindled unsuspecting victims of millions of dollars. Karma eventually caught up with Garza; for his role in the Pay Coin scam, he got hit with a $9m fine and a 21-month prison sentence followed by three years of supervised release.
How the Pay Coin scam came to be
The Pay Coin scam was the final piece of an elaborate fraud that waxed strong for a year. Joshua Garza launched GAW Miners in 2014. In the space of 365 days, it morphed from a firm that supplied miners to the catalyst for Pay Coin, a king amongst failed cryptocurrencies.
Joshua’s firm sold mining equipment at a time when mining crypto was brand new and extremely exciting. Before long, orders from new miners overwhelmed supply for GAW Miners. In August of 2014, GAW introduced a supposed cloud mining service for customers who had yet to receive their equipment. These “cloud mining contracts” (called “hashlets”) were broadly advertised and sold to a lot of anxious victims. However, it turned out that the hashlets didn’t mine coins. Actually, payouts produced from the hashlets were actually proceeds received from new subscribers. It was a Ponzi scheme.
Before the cat was let out of the bag, though, GAW announced its own cryptocurrency — Pay Coin (called Hash Coin at the time). There was a media frenzy as Pay Coin was advertised on almost all online crypto platforms. Joshua claimed Pay Coin was better than Bitcoin. He threw in some buzzwords like “flux capacitor hybrid,” and GAW, after announcing non-existent partnerships with several firms, guaranteed a floor price of $20 per coin. Before long, however, it was discovered that Pay Coin was minted at whim by GAW. The whole operation crashed.
Similarities between Pay Coin and other failed cryptocurrencies
Aside from Pay Coin, SpaceBit and Gems are two other failed cryptocurrencies. In 2014, SpaceBit was hyped to the high heavens. Promoters of SpaceBit called themselves the “first decentralized space company.” They planned to launch “nanosatellites” into space to provide a “globally-accessible blockchain.” By early 2015, the noise died down as the team couldn’t provide a prototype or a proof-of-concept.
GetGems was supposed to be a revolutionary social networking app that paid users Gems coin for viewing adverts. After a disappointing crowdsale, it was relegated to the background and is hardly breathing today.
Pay Coin, Spacebit, and GetGems are just three failed cryptocurrencies; there are countless other failed cryptocurrencies that quietly faded into obscurity. If you observe them carefully — after conducting diligent research — you’ll discover that failed cryptocurrencies share a number of similarities. These include:
- Overambition. Often, they are built upon an unrealistic idea
- Grand promises. Fast returns and lots of guarantees.
- A lack of any real value.
- Seem too good to be true.
- Lots of publicity. There’s someone (or people, ads) talking them up. The bigger the hype, the bigger the scam.
- Lack of resources to achieve their goals (like a good team of developers).
- Core value/goals that shift and change after each disappointment.
If you encounter any project that can be described using several of the above bullet points, you should be very wary of it.
Why do investors fall for failed cryptocurrencies — like Pay Coin?
One of the most perplexing thing about failed cryptocurrencies is the way naive investors seem to flock to them. During the Pay Coin saga, it wasn’t uncommon for critics of the controversial scheme to be publicly attacked by believers of Pay Coin. To evade serious questions from the public, Joshua Garza created HashTalk, a forum for Pay Coin scam lovers where everything was “GAWsome.” Despite the telling signs, people still fell for Pay Coin and other failed cryptocurrencies. Why?
Ignorance
Most victims of failed cryptocurrencies and other scams are crypto newbies who refuse to learn. If you haven’t the faintest idea of how AI (artificial intelligence) works, you have no business using all your savings to invest in an AI firm — it’s too risky. The same applies to crypto. If you don’t understand blockchain protocols and how they work to a reasonable extent, you shouldn’t be putting your money in cryptos.
Greed and carelessness
Greed and carelessness are two of the main reasons people bought Pay Coin when it was obvious that GAW Miners’ hashlets were the machinations of a Ponzi scheme. Although it isn’t wrong to try and rake in profits in a new space, it’s risky when no value is offered and the promised gains are gargantuan. Like many other failed cryptocurrencies, the Pay Coin scam offered juicy profits that attracted greedy and careless individuals.
Apparent Legitimacy
The reason most people fell for the Pay Coin scam is that GAW Miners seemed legal and legitimate. Garza appeared to be operating a real, honest business. He even shipped real equipment to buyers. So when the firm touted hashlets and introduced Pay Coin, even some wise investors were understandably duped.
Joshua Garza and media hype
Apart from offering juicy profits, Pay Coin had a talented and charismatic frontman in Joshua Garza. Garza looked respectable and lied confidently in interviews, painting a deceptive future of wealth and prosperity for prospective victims. The Pay Coin scam also ran an expansive advertising campaign with announcements of non-existing collaborations with respectable enterprises. If you were into crypto during the time of Pay Coin, you certainly heard about Pay Coin and might even have been tempted to jump on the bandwagon.
Lessons learned from the Pay Coin saga
Pay Coin, just like other failed cryptocurrencies, has come and gone. It’s not the first time someone has run a deceptive campaign to swindle noobs of their hard-earned money and it won’t be the last. However, with time, the number of bold attempts to scam crypto investors will reduce if lessons are learned from each experience. But just what did we learn from the Pay coin saga?
- The crypto industry is like the Wild Wild West. You need to arm yourself to the teeth and be vigilant.
- Not all that glitters is gold. If it looks too good to be true, it probably is.
- Do your own research. Don’t be swayed by media hype or attractive adverts.
- Don’t trust a project because of any charismatic frontman or the goodies the team promises. Instead, trust it because it is realistic, it offers value, and you see a future for it.
- Pay attention to your FOMO (Fear of Missing Out). Don’t jump on bandwagons.
Currently, we’re seeing ICOs that have the same characteristics of many past failed cryptocurrencies. Since the crypto industry is open to all and sundry, notorious minds won’t stop attempting to run scams. Will you be a victim of the next crypto scam? How can you evade these treacherous traps?
Arming yourself against failed cryptocurrencies
To steer clear of failed cryptocurrencies, the first tools in your arsenal should be mental alertness and personal discipline. You have to manage your emotions, tune up your sense of logic, and listen to it carefully. A strong awareness of your own emotions will keep you in check even when greed besieges your soul and it seems as if you’re missing out on some cash cow.
In addition to awareness and discipline, do your own diligent research before entering any market. Does the project offer any real value? Are their goals realistic? Can they deliver on their promises? Read in-between the lines, don’t be afraid to approach the team and ask questions, and ensure you cover the bases before you commit yourself.
The best way to avoid fraudulent crypto projects
According to Jon Stewart, the ex-host of the Daily Show, vigilance is the best form of defense against bullshit. It’s the same for the crypto industry; if you’re vigilant enough, you’ll be immune to scams. However, you won’t know what bullshit is or how to be vigilant in the crypto industry if you have no idea how cryptos work.
That’s why education is the best way to avoid failed cryptocurrencies. If you don’t know how cryptos work, you’ll likely fall victim to the next crypto scam.
