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The United States Securities and Exchange Commission (SEC) has filed a lawsuit against Geosyn Mining and its co-founders, alleging they defrauded investors out of $5.6 million by providing false information about the company’s crypto mining operations and misusing customer funds for personal expenses.
The lawsuit, filed by the SEC on April 24 in a federal court in Fort Worth, Texas, accuses Geosyn, its CEO Caleb Joseph Ward, and former operating chief Jeremy George McNutt of defrauding approximately 64 investors through the sale of service agreements marketed as securities between November 2021 and December 2022.
The SEC Digs Deep
According to the SEC, these agreements promised to buy and operate crypto mining rigs on behalf of customers for a fee. However, the SEC claims that Geosyn falsely represented having contracts with electricity providers for discounted energy rates when, in reality, the costs were significantly higher than stated.
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Ward and McNutt allegedly lied to investors about Geosyn’s mining operations, claiming to have purchased 1,400 mining rigs but failing to buy 400 of them and never bringing most of the purchased machines online.
Deceiving Investors
While investors were promised the ability to choose which cryptocurrency to mine, Geosyn only allowed mining of Bitcoin, the SEC alleges. To deceive investors into believing their investments were profitable, Geosyn made BTC payouts based on fabricated mining production rates and profits.
The SEC also accuses Geosyn of misappropriating investor funds for personal expenses, including meals, nightclubs, vacations, guns, watches, and legal fees. McNutt reportedly used company funds for extravagant purchases, such as a $20,000 “Las Vegas nightclub wedding celebration” for Ward and a $49,000 family trip to Disney World.
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SEC Highlights Additional Expenses
Furthermore, the SEC claims that McNutt and a Geosyn employee were separately arrested for drunk driving during a crypto conference in June 2022, leading to additional expenses for bail and legal fees.
Less Than $1,900 in the Bank
By the end of 2022, Geosyn faced financial difficulties as new investor funds dried up, leaving the company with less than $1,900 in the bank. McNutt left the company in October 2022, allegedly reporting him for embezzlement without disclosing his own misuse of funds.
In early 2023, Ward informed investors via email that the company would file for bankruptcy but never followed through. The SEC is seeking a permanent injunction, repayment of misappropriated funds, and penalties against the defendants.