Geosyn Mining Faces SEC Lawsuit Over $5.6m Crypto Investor Fraud Allegations
Summary:
The US Securities and Exchange Commission (SEC) has sued Geosyn Mining, its CEO Caleb Joseph Ward, and former operating chief Jeremy George McNutt, alleging they deceived investors, leading to losses around $5.6 million. They reportedly lied about the quantity of operating crypto mining rigs and misused investors' funds for personal expenses. Furthermore, they made false claims of having contracts with electricity providers for low-cost energy and didn't purchase all contracted mining rigs. Discrepancies were also found in Bitcoin payouts and misuse of funds for personal luxuries. As investor funds depleted, the company began facing serious financial troubles.
A lawsuit has been lodged against Geosyn Mining and its co-founders by the US securities regulator, accusing them of defrauding investors of around $5.6 million. They allegedly misled investors regarding the quantity of crypto mining rigs they operated and misused investors' funds for personal expenses. The lawsuit was filed on April 24 by the Securities and Exchange Commission in a federal court in Fort Worth, Texas. It has been alleged that Geosyn, along with its CEO Caleb Joseph Ward and the former operating chief Jeremy George McNutt, deceived about 64 investors through falsely described service contracts, sold as securities between November 2021 and December 2022.
According to SEC, Geosyn lied about having contracts with electricity providers for low-cost energy. In reality, their costs were 40-50% higher than what they claimed to their clients. The regulator attests that of the 1,400 mining rigs that Geosyn committed to procuring through service contracts, they failed to acquire 400 of them. Moreover, most of the acquired mining machines were never brought online.
Despite telling investors that they had the option of selecting the kind of crypto they wanted to mine, Geosyn consistently rejected requests to mine anything except Bitcoin. The company is also accused by SEC of generating fraudulent documents, that displayed untrue mining production rates and profits. Even though they made $320,000 from mining Bitcoin, the SEC maintains they provided investors with Bitcoin worth approximately $354,500, to cover the gap, McNutt was allegedly purchasing Bitcoin and forwarding it to Ward, who would then distribute it to investors.
The regulator purports that Ward and McNutt improperly used $1.2 million of investor money for personal expenses. This reportedly included meals, night outs, holidays, firearms, watches and legal expenses such as a $20,000 wedding gathering at a Las Vegas nightclub for Ward and a $49,000 family vacation to Disney World. They are alleged to have used an additional $22,000 of investor funds for a breathalyzer device and other expenses related to separate drunk driving arrests of McNutt and a Geosyn employee during a June 2022 crypto conference.
By the end of 2022 Geosyn was left with less than $1,900 in its bank account as new investor funding ceased. The SEC stated that the lack of money meant Geosyn could not profit as it did not have the advantageous electricity contracts it had advertised to investors. According to SEC, McNutt relinquished his ownership and left in October 2022, then Ward reportedly informed authorities about McNutt's alleged embezzlement without admitting his own wrongdoing.
In early 2023, with Geosyn in desperate financial trouble, Ward communicated to investors about due Bitcoin debts through "IOU" notes and announced in June a plan to file for bankruptcy, which never came to pass. The SEC's lawsuit is calling for a permanent injunction, reimbursement of the allegedly misused funds, and fines against the defendants. No comments were immediately available from Geosyn, Ward or McNutt when reached.
Published At
4/26/2024 8:49:09 AM
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