The Securities and Exchange Commission (SEC) of the United States has initiated legal proceedings against Geosyn Mining and its co-founders for deceiving investors and swindling them out of $5.6 million. According to the SEC’s lawsuit filed on April 24 in a federal court in Fort Worth, Texas, Geosyn, its CEO Caleb Joseph Ward, and former operating chief Jeremy George McNutt defrauded approximately 64 investors through the sale of service agreements presented as securities between November 2021 and December 2022.
The SEC alleges that Geosyn and its co-founders made false claims about the number of cryptocurrency mining rigs they operated and misused customer funds for personal expenses. The company falsely represented that it had contracts with electricity providers offering cheap energy for mining operations, when in reality, the costs were significantly higher than what was communicated to customers, sometimes as much as 40-50% above the rates disclosed.
Additionally, the SEC claims that Ward and McNutt provided false information about Geosyn’s mining operations. Out of the 1,400 mining rigs that Geosyn had agreed to purchase through service agreements, it failed to acquire 400 of them and never activated the majority of the purchased mining machines.
Geosyn’s agreements assured investors that they could choose which cryptocurrency to mine, but the company rejected any requests to mine currencies other than Bitcoin (BTC).
To deceive investors into believing that their mining machines were operational and profitable, Geosyn made Bitcoin payouts, despite the machines not being functional. The company created fabricated documents with false mining production rates and profits.
The SEC alleges that Geosyn earned $320,000 from mining Bitcoin but distributed approximately $354,500 worth of Bitcoin to investors. To cover the shortfall, McNutt purchased Bitcoin and sent it to Ward, who then distributed it to investors.
Furthermore, the SEC claims that Ward and McNutt misappropriated approximately $1.2 million of investor funds for personal expenses, including meals, nightclubs, vacations, firearms, watches, and legal fees. The misappropriation also included an incident where McNutt allegedly used 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.
The SEC also alleges that Ward and McNutt used $22,000 of investor funds for a breathalyzer device and other expenses related to separate arrests and convictions for drunk driving involving McNutt and a Geosyn employee during a crypto conference in June 2022.
By the end of 2022, Geosyn faced a shortage of new investor funds and had less than $1,900 in its bank account. The SEC states that the company was unable to generate profits due to the absence of the favorable electricity contracts that Geosyn had promised to investors.
In October 2022, McNutt left Geosyn and relinquished his ownership. Ward, however, reportedly reported McNutt to the authorities for embezzlement without disclosing his own misappropriations, according to the SEC.
In early 2023, with Geosyn facing severe financial difficulties, Ward sent IOU notes to investors for their owed Bitcoin. He later informed them in June that the company would file for bankruptcy, which never materialized, as per the SEC.
The SEC is seeking a permanent injunction, the repayment of the alleged misappropriated funds, and penalties against Geosyn, Ward, and McNutt.
At the time of writing, Geosyn, Ward, and McNutt have not responded to requests for comment.