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Wall Street Exec Sued for Role in Fraudulent Cryptocurrency Scheme

Four investors in GAW Miners have sued Stuart A. Fraser for his role at the defunct crypto business, following a guilty plea of wire fraud by his longtime partner, Josh Garza.

In a complaint first filed in the U.S. District Court for Connecticut last year, the plaintiffs accused Fraser, GAW Miners, and ZenMiner of violating federal and state securities laws. Fraser, the vice chairman of Wall Street firm Cantor Fitzgerald, subsequently filed a motion to dismiss all the allegations, which the court denied, according to the court’s ruling dated on Oct 11.

The plaintiffs, Denis Marc Audet, Michael Pfeiffer, Dean Allen Shinners, and Jason Vargas, stated in the complaint that Fraser had a “deep involvement with Garza and GAW Miners.”

This relationship assisted Garza when he made a series of false statements to prospective customers and investors, such as GAW Miners’ “phony” acquisition of ZenMiner, the complaint says.

Fraser’s lawyer, Daniel H. Weiner from Hughes Hubbard & Reed LLP, told CoinDesk:

“This is the initial phase of the case. We look forward to disprove the litigation as the case progresses.”

In their civil suit, the plaintiffs cited Fraser’s longtime personal and business mentorship and relationships with Garza, and his engagement in the GAW Miners business, including making operational decisions and representing GAW Miners in third-party negotiations.

Fraser was also accused of leveraging his previous position at Cantor Fitzgerald to “introduce potential investors to Garza and GAW Miners.”

The four plaintiffs, who seek class-action status for their case, had purchased hashlets, a kind of investment contract that paid returns on GAW’s digital currency mining.

On July 20, Garza, the former CEO of GAW Miners, was convicted for charges that derived from his operation of GAW, GAW Miners, ZenMiner and ZenCloud, all of which were suspected of fraudulent activities.

Originally scheduled for October, the sentencing may be postponed to early next year and Garza may face a penalty of over $9 million with up to 20 years in prison. In addition, on Oct 4, a U.S. federal judge signed a final judgment holding Garza liable for $9.18 million in another case brought by the Securities and Exchange Commission less than two years ago.

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GAW Miners CEO Held Liable for $9.8 Million Judgment in SEC Case

A US federal judge has signed off on a final judgment against Homero Josh Garza, the CEO of the now-defunct cryptocurrency mining firm GAW Miners.

The judgment, entered on October 4, comes less than two years after the Securities and Exchange Commission (SEC) first filed suit against Garza, GAW Miners and ZenMiner, a related firm. Garza was accused and charged with violating securities laws through the offering of so-called “Hashlets,” or “virtual miners” which were sold to customers through an internal exchange.

Today’s judgment follows a guilty plea from Garza, given in July, in a related criminal case pursued by the U.S. Justice Department. Garza plead guilty to a single wire fraud charge and faces sentencing early next year.

In the SEC’s civil case, Garza has been held liable for $9,182,000, an amount that the court order said will be “deemed satisfied by the order of restitution that will be entered against him when he is sentenced in the related criminal case.”

GAW Miners, prior to its collapse, previously offered hosted mining services. It later moved into the cloud mining business, through which customers can purchase hash power generated by hardware owned by the miner. But in the case of GAW, the firm didn’t actually possess as much hash power as it sold – prompting a harsh rebuke from federal prosecutors in their original complaint from December 2015.

“Though cloaked in technological sophistication and jargon, defendants’ fraud was simple at its core – defendants sold what they did not own, and misrepresented the nature of what they were selling,” they wrote at the time.

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