(This article by Bob Audette was first published in the Brattleboro Reformer on Feb. 2, 2017.)
BRATTLEBORO — The remaining defendant in a bitcoin scheme that allegedly defrauded millions of dollars from thousands of investors is once again asking a federal judge to dismiss the case.
According to documents filed on Jan. 23 in the U.S. District Court for the District of Connecticut, attorneys for Stuart A. Fraser maintain that the plaintiffs in the lawsuit have not shown he controlled GAW Miners or the actions of his former defendant, Homero Joshua Garza.
Fraser noted that when the U.S. Securities and Exchange Commission filed a court action against Garza, it did not do so against him, “after it thoroughly investigated his role in these very circumstances. Instead, the SEC charged only Garza — Plaintiffs’ newest bedfellow — and the Companies, the other defendants in this action.”
Fraser originally filed a motion to dismiss on Dec. 6, 2016. The Jan. 23 filing is a memorandum in support of his motion to dismiss.
In 2002, Garza began Optima Computers in Brattleboro. The company offered new computer systems for sale, as well as service and repair of existing computer systems, of which Fraser was an investor. After Optima Computers went out of business, Garza and Fraser founded Great Auk Wireless High Speed Internet, also in Brattleboro.
Garza was originally named in the civil suit filed in Connecticut, but on Nov. 4, 2016, he was dismissed after “conversations …” between Garza and the plaintiffs.
In the Dec. 6 filing, legal counsel for Fraser contended “Plaintiffs made a deal with the Devil, agreeing with the previously alleged mastermind of the fraud, original lead defendant Homero Joshua Garza, to dismiss all the claims against him in exchange for purported information from him in the hope that it could cure the deficiencies in their claims against Fraser.”
In their filing in opposition to Fraser’s request for a dismissal, which was submitted on Jan. 9, the plaintiffs characterized Fraser as “the man behind the curtain.” In previous filings, plaintiffs characterized Fraser as “a mentor and business associate of Garza for over a decade.”
The SEC suit against Garza has been stayed twice, but the documents explaining the reasons for those stays have been sealed by the federal court.
In their Jan. 9 filing, the plaintiffs described Fraser as “a Wall Street mogul and Vice-Chairman of prominent investment bank Cantor Fitzgerald …” who first befriended Garza when Garza was still a high schooler. “The two quickly became close friends, and Garza looked to Fraser for mentorship, business advice, financial support, and investments.”
In the memorandum to support the motion to dismiss the suit against Fraser, his attorneys note that the plaintiffs have failed to show that Fraser controlled Garza or the companies he was operating.
“[T]he crux of Plaintiffs’ claims is Garza’s and the Companies’ sale of ‘products and investment contracts to over 10,000 investors’ who believed that they would make profits from mining and investing in virtual currency. Yet none of Plaintiffs’ allegations, taken as a whole or individually, supports the inference that Fraser had actual control over any of these allegedly fraudulent transactions. Plaintiffs do not allege that Fraser directed or controlled any policy, procedure or method of operation undertaken by Garza or the Companies …”
Claims that Fraser spoke with third parties about the bitmining companies, that Fraser offered professional suggestions to Garza or that he had access to information about the company do not lead “to a finding of control, because Plaintiffs do not bridge the pleading gap between this limited involvement and Garza’s fraudulent scheme to sell virtual currency products.”
In addition, contend Fraser’s attorneys, “none of Plaintiffs’ allegations supports a finding that Fraser was responsible for the Companies’ operations, record-keeping, general performance or any other responsibilities attendant to a director, never mind those related to Garza’s virtual currency fraud. … Nowhere do Plaintiffs suggest that Fraser controlled Garza or the Companies by threatening to withhold financing, implicitly or otherwise.”
If anything, contend Fraser’s attorneys, the pleadings of the plaintiffs “demonstrate that Garza was the ultimate authority on all things related to the Companies — beholden to no one but himself.”