If they were legit then BTC payments should be being sent to an exchange, converted to dollars, and then used to purchase hardware/electricity/etc.
Not per se. If they have 1 Petahash running on SHA-256 and have only sold half of it, every new sale could be used to payout in BTC for new customers as the hardware/costs have already been paid.
If you're a one man operation with your own hardware it makes sense to send BTC to an exchange if you need that to pay for electric. But if you have fiat at hand to pay without the need to convert BTC the "cycle" is broken. Considering that GAW has thousands of streams of coins (whether btc or fiat or else) chances that your payout is going to be converted to USD to pay for new hardware are small.
GAW doesn't have "thousands of streams", it all comes from mining ltc and/or btc. There are no other coins that can support the amount of hashrate they claim.
In your example, if they had 1 PH/s and sold half they would immediately convert the payment to USD and buy another 0.75 PH/s to sell.
It makes no sense to keep the payment and use it to payout mining earnings.