Tag Archives: Hartford

Former Virtual Currency CEO Pleads Guilty to $9 Million Fraud Scheme

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Thursday, July 20, 2017

Deirdre M. Daly, United States Attorney for the District of Connecticut, and Patricia M. Ferrick, Special Agent in Charge of the New Haven Division of the Federal Bureau of Investigation, announced that HOMERO JOSHUA GARZA, 32, of Texas, formerly of Somers, Conn., waived his right to be indicted and pleaded guilty today in Hartford federal court to one count of wire fraud related to his role in his companies’ purported generation and sale of virtual currency.

According to court documents and statements made in court, “virtual currency” is a digital representation of a value that can be traded and functions as a medium of exchange. Virtual currency generally is not issued or guaranteed by any jurisdiction or government, and its value is decided by consensus within the community of users of the virtual currency. A virtual currency generally self-generates units of currency through a process called “mining.” A virtual currency “miner” is computer hardware that runs special computer software to solve complex algorithms that validate groups of transactions in that virtual currency. Once a complex algorithm is solved, a unit of currency, such as a bitcoin, is awarded to the individual operating the miner. This process is known as “mining.”

Between approximately May 2014 and January 2016, GARZA, through GAW, GAW Miners, ZenMiner, and ZenCloud, companies he founded and operated, defrauded victims out of money in connection with the procurement of virtual currency on their behalf. The companies sold miners, access to miners, and the right to purchase a virtual currency called “paycoin,” as well as “hashlets.” A hashlet entitled an investor to a share of the profits that GAW Miners or ZenMiner would purportedly earn by mining virtual currencies using the computers that were maintained in their data centers. In other words, hashlet customers, or investors, were buying the rights to profit from a slice of the computing power owned by GAW Miners and ZenMiner.

To generate business and attract customers and investors, GARZA made multiple false statements related to the scheme, including stating that GAW Miners’ parent company purchased a controlling stake in ZenMiner for $8 million and that ZenMiner became a division of GAW Miners. In fact, there was no such transaction. GARZA also stated that the hashlets GARZA’s companies sold engaged in the mining of virtual currency. In fact, GARZA’s companies sold more hashlets than was supported by the computing power maintained in their data centers. Stated differently, GARZA’s companies sold the customers the right to more virtual currency than the companies’ computing power could generate. GARZA also stated that the market value of a single paycoin would not fall below $20 per unit because GARZA’s companies had a reserve of $100 million that the companies would use to purchase paycoins to drive up its price. In fact, no such reserve existed.

During the scheme, GARZA, through his companies, used money his companies had made from new hashlet investors to pay older hashlet investors. The payments were money that the companies owed the older investors based on the purported mining GAW Miners and ZenMiner had done on the investors’ behalf.

The loss attributable to GARZA from the scheme was $9,182,000.

GARZA is scheduled to be sentenced by U.S. District Judge Robert N. Chatigny on October 12, 2017, at which time he faces a maximum term of imprisonment of 20 years.

This matter is being investigated by the Federal Bureau of Investigation and is being prosecuted by Assistant U.S. Attorneys John T. Pierpont, Jr. and Jonathan Francis.

Drug Company Sales Rep Admits Role in Kickback Scheme Related to Fentanyl Spray Prescriptions

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Tuesday, July 11, 2017

Deirdre M. Daly, United States Attorney for the District of Connecticut, announced that NATALIE LEVINE, 33, of Scottsdale, Arizona, waived her right to be indicted and pleaded guilty today before U.S. District Judge Michael P. Shea in Hartford to one count of engaging in a kickback scheme that defrauded federal healthcare programs.

According to court documents and statements made in court, from approximately March 2013 to October 2014, LEVINE was employed by Insys Therapeutics, an Arizona-based pharmaceutical company that manufactured and sold Subsys, a fentanyl-based sublingual spray that was approved by the Food and Drug Administration solely for the management of breakthrough pain in cancer patients. LEVINE was a sales representative for the company and was responsible for covering the territories that included Connecticut, New Hampshire and Rhode Island.

In pleading guilty, LEVINE admitted that she induced certain medical practitioners, including an advanced practice registered nurse (APRN) in Connecticut, a physician’s assistant (PA) in New Hampshire, and a physician in Rhode Island, to prescribe Subsys by paying them to participate in hundreds of sham “Speaker Programs.” The Speaker Programs, which were typically held at high-end restaurants, were ostensibly designed to gather licensed healthcare professionals who had the capacity to prescribe Subsys and educate them about the drug. In truth, the events were usually just a gathering of friends and co-workers, most of whom did not have the ability to prescribe Subsys, and no educational component took place. “Speakers” were paid a fee that ranged from $1,000 to several thousand dollars for attending these dinners. At times, the sign-in sheets for the Speaker Programs were forged so as to make it appear that the programs had an appropriate audience of healthcare professionals.

The medical practitioners were paid thousands of dollars in illegal kickbacks in order to prescribe Subsys, and induce others to prescribe Subsys, over similar medications. Medicare Part D plans authorized payment for hundreds of Subsys prescriptions written by the three medical practitioners, resulting in a loss of approximately $4.5 million.

LEVINE pleaded guilty to one count of conspiracy to violate the anti-kickback law, an offense that carries a maximum term of imprisonment of five years and a fine of up to $250,000. Judge Shea scheduled sentencing for October 5, 2017.

This investigation is being conducted by the U.S. Department of Health and Human Services Office of the Inspector General and the Federal Bureau of Investigation, with the assistance of the Drug Enforcement Administration’s Tactical Diversion Squad. The case is being prosecuted by Assistant U.S. Attorneys Douglas P. Morabito and Richard M. Molot.

Several other individuals affiliated with Insys Therapeutics, and medical practitioners involved in this kickback scheme, have been charged in the District of Connecticut and in other Districts across the United States.

U.S. Attorney Daly encouraged individuals who suspect health care fraud to report it by calling the Health Care Fraud Task Force (203) 785-9270 or 1-800-HHS-TIPS.