Cantor Fitzgerald is preparing to launch a bitcoin futures program sometime next year, a move that solidifies the Wall Street firm's place among traditional finance players now trading digital assets.
Cantor Fitzgerald is preparing to launch a bitcoin futures program sometime next year, a move that solidifies the Wall Street firm's place among traditional finance players now trading digital assets. The announcement represents another milestone for cryptocurrency acceptance in mainstream markets. But the firm's entry into this space comes with historical baggage—a connection to one of the most bizarre and damaging frauds in digital currency history.
Back in 2015, Stuart Fraser served as vice chairman and partner at Cantor Fitzgerald. He put personal money into a cryptocurrency venture called GAW Miners. Joshua Homero Garza ran the company. A Wall Street Journal article noted Fraser's involvement with the operation, and that single mention—coming from such a prominent finance executive—lent credibility to what would turn out to be an elaborate fraud.
GAW Miners, which stood for "Genius' At Work," took its name from an earlier business Garza had founded. That previous company, also called GAW, operated in broadband internet services. The business ran into serious problems. Customers needing technical support found nobody available to help. Local authorities took over management of the company and shut down operations.
In its first years, GAW Miners sold bitcoin mining equipment. The timing mattered. During 2014, few companies could obtain mining equipment, and supply couldn't keep pace with demand. GAW shipped slowly, but the entire industry faced the same problem. A competitor called Butterfly Labs was notorious for delays too. In that environment, slow delivery didn't destroy a company's credibility.
Garza made a pivot. He moved away from the hardware business and repositioned GAW as a cloud mining company. Crypto circles still discuss cloud mining to this day. The sales pitch is simple: customers invest capital, companies build and operate mining farms, investors receive a cut of the mined bitcoin. The company handles all electricity costs, technical problems, and equipment maintenance. Investors wait for payouts.
What goes on inside cloud mining companies is unknowable. Customers have zero transparency. A company could mine bitcoin using equipment customers bought. It could operate as a ponzi scheme, paying early investors from money deposited by new participants. The underlying economics reveal the truth: if running mining hardware with someone else's capital generated profit, every cloud mining business would keep the equipment and bitcoin for itself. None of them do.
GAW developed a more complex product to insert another layer between investors and the underlying operations: hashlets. The concept was clever for cloud mining at that time. Each hashlet represented a discrete amount of computing power on the bitcoin network. Own a hashlet, and it produces bitcoin. You could collect payouts or sell it to another buyer through GAW's marketplace. That buyer would then own the same computing power. Garza made a specific promise: hashlets would "always be profitable."
Problems emerged fast. Investors holding hashlets started complaining. Withdrawing bitcoin from GAW's system grew harder. Some couldn't access their funds at all. Rather than address these issues, Garza created something new. He claimed this innovation would compensate everyone who had lost money.
He gave the new product a name: Paycoin. Garza promoted it as a next-generation cryptocurrency that made transactions easier for regular people. Unlike bitcoin, he argued, Paycoin worked for everyday commerce. He claimed partnerships with major financial names: Walmart, Amazon, PayPal, Mastercard. These partnerships, he said, would drive adoption. But Garza's real sales pitch centered on a guarantee. His team had established a fund worth hundreds of millions of dollars that would maintain a price floor of $20 per coin, he announced. Paycoin holders couldn't lose, he promised.
Every element was fake. The partnerships existed only in press materials Garza circulated. He had contacted corporate representatives, and none had approved anything. The coin's structure concentrated ownership among Garza and his circle. When Paycoin launched, it crashed below the $20 floor in days and never recovered.
What happened next descended into chaos. Garza made public threats against a business partner, invoking the Russian Mafia by name. The Securities and Exchange Commission opened an investigation. Garza's personal emails leaked into public view, showing payment notices that bounced, messages from a cryptocurrency news site that kissed his ass, correspondence with Fraser, and private exchanges between Garza and journalists.
Fraser, the Cantor Fitzgerald vice chairman, left his position at the firm. He said he needed "to spend time with his family." His financial stake in Garza's companies was personal, not a corporate investment, though the WSJ coverage of Paycoin had presented it otherwise.
Authorities moved against Garza. He pled guilty to wire fraud charges. He faces sentencing on January 5, 2018, with prosecutors pursuing sentences up to 20 years in prison. Fraser now faces a class action lawsuit filed by customers who invested in GAW Miners and lost money. The suit remains unresolved.
With its bitcoin futures launch, Cantor Fitzgerald is reentering cryptocurrency. The institutional embrace strengthens the industry. Heavyweight financial firms taking positions in digital assets signal market maturation. The firm should remember, though, who shaped its earlier crypto experience: a vice chairman who invested company prestige in one of cryptocurrency's most ridiculous and destructive scams.
