Garza to give up millions in profits

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BOSTON, Mass. — A former Brattleboro businessman has agreed to discontinue any illegal activity related to his sales of crytpo-currency and to give up $9,182,000 in profits from his illegal or wrongful conduct, including an additional $742,774 in interest.

In July, Homero Joshua Garza pleaded guilty to wire fraud in a criminal case filed against him in federal court by the Securities and Exchange Commission.

Garza told customers he operated a number of bitcoin mining operations — Gaw Miners, Zenminer and Zen Cloud — and that investment in the company would reap financial rewards.

Garza, who founded the now-defunct Optima Computers in Brattleboro in 2002, went on to found the virtual currency companies and used them to defraud investors, according to a statement issued in July by the United States Attorney District of Connecticut.

Virtual currency was described in the statement as "a digital representation of a value that can be traded and functions as a medium of exchange." It is not issued or guaranteed by any jurisdiction or government. Value is decided on by consensus within a community of users of the currency.

Once Optima went out of business, Garza and his then business mentor, Stuart Fraser, founded Great Auk Wireless High Speed Internet, also in Brattleboro, whose client base was later bought by an unrelated internet provider.

The two men also founded GAW Miners and ZenMiner. Fraser and Garza were named in a civil suit by a number of the investors, but Garza was eventually dismissed from the case after he agreed to work with the plaintiffs. The civil case has not yet been resolved.

According to court documents filed by the U.S. Securities and Exchange Commission, violations committed by Garza "relate to his sale of investment contracts, that he named hashlets, to more than 10,000 investors." According to industry sources, the SEC only has the ability to regulate securities and deals with crypto-currency schemes on a case by case basis. Bitcoins are not a security — they are a commodity, like the U.S. dollar, used to purchase goods and services.

However, in this case, posited the industry sources, the SEC came to the conclusion that Garza's scheme involved securities because he was offering investment vehicles with a promise of a financial return.

The proposed final agreement, which has not yet been accepted by the U.S. District Court for the District of Connecticut, stipulates that Garza cease his illegal activities related to his crypto-currency companies. However, Garza is not prohibited from creating new companies in a similar vein as long as he registers the company, issues disclosures, follows other SEC regulations and doesn't break the law. Because Garza was not a registered broker or dealer, he has no license to revoke. If he had been in possession of a license, noted the industry sources, the SEC could have taken it away and prohibited him from engaging in any further brokerage activities.

Garza faces a prison sentence of up to 20 years in prison. He is scheduled to be sentenced on Oct. 12.

Bob Audette can be contacted at 802-254-2311, ext. 160.

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