The SEC claimed that the crypto miner Geosyn created “bogus documents” with “fabricated mining rates and profits” while highlighting false number of mining rigs purchased.
On Wednesday, April 24, the US Securities and Exchange Commission (SEC) filed a lawsuit against crypto miner Geosyn Mining alleging them of defrauding more than 64 investors to the tune of $5.6 million. As per the SEC lawsuit, Geosyn and its founders lied about the crypto-mining rigs they operated and used the customers’ funds for personal expenses.
In the lawsuit in a federal court in Fort Worth, Texas, the SEC named Geosyn, its CEO Caleb Joseph Ward, and former operating chief Jeremy George McNutt. If further accuses them of selling service agreements as securities from November 2021 to December 2022.
In the lawsuit, the SEC notes that Geosyn “falsely claimed” the agreements to buy and run crypto miners on behalf of its customers and that it had contracts with electricity providers to get cheap energy. However, the real costs were “as high as 40-50% above” the rates given to its customers.
Moreover, co-founders Warn and McNutt also lied to investors regarding Geosyn’s operations, claimed the SEC. The securities regulator stated that Geosyn first told its customers that they would buy 1,400 mining rigs, however, it failed to buy 400 of them, and “never brought most of the purchased mining machines online”.
Geosyn’s agreements also stated that customers would get the option to choose what crypto to mine, however, the firm later rejected to mine anything other than Bitcoin.
The SEC claimed that the crypto miner created “bogus documents” with “fabricated mining rates and profits”. It also made BTC payouts to investors making them “believe that their mining machines were operational and profitable when they were not”. Although Geosyn earned only $320,000 from Bitcoin mining, it gave around $354,500 worth to investors.
Geosyn Founders Used Customers’ Funds for Personal Use
The SEC also alleges that Ward and McNutt misappropriated approximately $1.2 million in investor funds for personal expenses, including meals, nightclub outings, vacations, firearms, timepieces, and legal fees. This misuse of funds reportedly includes instances such as McNutt’s purported use of the company’s credit card for a $20,000 “Las Vegas nightclub wedding celebration” for Ward and a $49,000 family trip to Disney World.
Additionally, it is claimed that Ward and McNutt spent $22,000 of investor funds on a breathalyzer device and other expenses related to McNutt and a Geosyn employee’s separate arrests and convictions for driving under the influence during a crypto conference in June 2022.
Later in October 2022, McNutt left the firm while giving up his ownership. The SEC said that Ward reached out to the authorities to report McNutt for embezzlement “without disclosing his own misappropriations”.
After facing dire financial stress in 2023, Ward wrote to investors some “IOU” notes for their owned Bitcoins and said that Geosyn would file for bankruptcy which actually never happened.
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