Crypto Trial Will Have Limited Plexiglass On Scientist's Advice

By Cara Salvatore
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Law360 (April 5, 2021, 7:46 PM EDT) -- An expected June trial in a class action over an alleged $9 million cryptocurrency Ponzi scheme will take place in a Connecticut federal courtroom almost free of plexiglass, which a judge said "isn't all that protective" against the spread of COVID-19.

Citing the advice of a scientific expert, U.S. District Judge Michael Shea said Monday that masks and ventilation will be the primary safety measures in the Hartford courtroom if the trial begins June 2.

A scientist who has advised the court and others in the Northeast, plus institutions like the Academy Awards, has said that ventilation is the top priority for virus safety, and that plexiglass interferes with ventilation.

"Frankly, the plexiglass isn't all that protective," Judge Shea told the parties, citing the advice of Dr. Erin Bromage of the University of Massachusetts Dartmouth. "We've studied carefully the airflow of our courtrooms, and we can't really afford to be interrupting the airflow."

The only plexiglass in the courtroom, therefore, will be for the witness, who will be allowed to unmask. There will also be a HEPA filter in the witness booth to help clean the air. Everyone else must remain masked, regardless of vaccination status.

He told the parties that there will be a liability-only phase lasting roughly a week after a jury is selected, which could take more than a day in itself. There is a possible criminal trial that has priority, the judge said, but the Ponzi scheme trial will go forward if that defendant pleads guilty.

"'Expect' is the operative word. I can't guarantee it," the judge said of the June trial date.

The sole remaining defendant in the case is Stuart Fraser, a minority investor in the Ponzi scheme, which was allegedly conducted through former co-defendant Joshua Garza's GAW Miners LLC and ZenMiner LLC. Customers say Fraser held a 41% interest in GAW, that Garza publicly touted Fraser as an active partner and that emails show Fraser advising Garza about GAW's operations.

Garza pled guilty to wire fraud in 2017 and was sentenced to 21 months in prison in 2018, plus millions in restitution.

The customers' 2016 suit followed a U.S. Securities and Exchange Commission suit alleging fraud centered on cryptocurrency mining, which is the use of computing to solve complex equations to verify crypto transactions. A "miner" that completes an equation receives new units of the currency. Garza's companies allegedly offered the plaintiffs mining hardware that would be hosted by the companies and be accessible to the customers remotely. But the companies didn't have the equipment they claimed, the customers say.

After customers began questioning Garza's enterprise, the companies turned to selling "hashlets," portions of computing might without the option to receive physical hardware. But Garza's companies still didn't have the computational power they claimed, and used new customers' money to pay off older customers, the suit claims.

The damages in the case are complicated, involving varied chargebacks to class members and numerous other transactions, the judge has said in the past.

The class is represented by Russell Rennie and Seth Ard of Susman Godfrey LLP.

Fraser is represented by Daniel Weiner, Hannah Miller and Amina Hassan of Hughes Hubbard & Reed LLP, and Sean Fisher of Brenner Saltzman & Wallman.

The case is Audet et al. v. Garza et al., case number 3:16-cv-00940, in the U.S. District Court for the District of Connecticut.

--Additional reporting by Dean Seal and Philip Rosenstein. Editing by Regan Estes.

For a reprint of this article, please contact reprints@law360.com.

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Case Information

Case Title

Audet et al v. Garza et al


Case Number

3:16-cv-00940

Court

Connecticut

Nature of Suit

Securities/Commodities

Judge

Michael P. Shea

Date Filed

June 15, 2016

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