What it was
The SEC's complaint records GAW Miners, LLC as a Delaware limited liability company formed in May 2014 with its principal place of business in Bloomfield, Connecticut, and Homero Joshua Garza as its founder, chief executive and majority owner. A sister company, ZenMiner, LLC, was formed two months later and traded as ZenCloud.
The business started by selling mining machines, moved to hosting machines it had sold, and then in August 2014 changed shape again. Rather than ship hardware, it sold a contract it called a Hashlet: an entitlement to a share of the profits from mining done on the company's own computers in its own data centres. A buyer never touched a machine. The company sold about $19 million of these in five months, according to the complaint. It also launched a currency of its own, Paycoin.
Cloud mining contracts are the part worth understanding. When you buy hashrate you cannot see, you are trusting an unverifiable claim about how many machines exist, and there is no way to check it from outside. That is precisely where this went.
On the record
The SEC filed suit in the United States District Court for the District of Connecticut on 1 December 2015. Its complaint alleged that GAW Miners and ZenMiner "did not own enough computing power for the mining they promised to conduct, so most investors paid for a share of computing power that never existed", and that returns paid to some buyers came from sales to others.
On 2 June 2017 the court entered final judgment against both companies, permanently enjoining each from violating the registration and antifraud provisions of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and ordering them jointly and severally to pay approximately $10 million in disgorgement and prejudgment interest plus a $1 million civil penalty each. Final judgment against Garza followed on 4 October 2017.
Garza pleaded guilty to one count of wire fraud on 20 July 2017. On 13 September 2018 Judge Robert N. Chatigny sentenced him to 21 months in prison, three years of supervised release and restitution of $9,182,000, the amount the Justice Department says he took from hundreds of people worldwide. Both companies had ceased operations by then.