The United States security regulator has sued Geosyn Mining and its co-founders for fraudulently scamming investors out of $5.6 million, lying about the number of operating crypto mining rigs and misappropriating customer money for personal expenses.
The lawsuit by the SEC was filed in federal court in Fort Worth, Texas, on April 24. It accused Geosyn, CEO Caleb Joseph Ward, and former operating chief Jeremy George McNutt of fraud against approximately 64 investors through service agreements sold as securities from November 2021 through December 2022.
The SEC has alleged the buy-and-run crypto miner agreements "falsely claimed to have been on behalf of customers." Geosyn had contracts with the electricity provider for cheap energy, but in reality, the costs were "as high as 40-50% above" what customers were told.
The SEC further charged that Ward and McNutt lied to investors about Geosyn's operations. The SEC, in another accusation, said that among the 1,400 mining rigs the company entered into service agreements to purchase, 400 were not bought, and it "never brought most of the purchased mining machines online.".
Geosyn agreements said that the investor would have the right to select the crypto he would like to mine, but according to the firm's lawsuits, these selections were refused by the firm if it was anything but Bitcoin.
The SEC claimed that the company paid BTC to its investors with the purpose of making them "believe that their mining machines were operational and profitable when they were not," all during the firm's creation of "bogus documents" with "fabricated mining production rates and profits.
The SEC alleges, however, that it earned $320,000 from BTC mining but gave around $354,500 worth to investors. To cover the difference, McNutt bought Bitcoin and sent it to Ward for onward transmission to investors, the regulator said.
The SEC further alleges that Ward and McNutt misappropriated around $1.2 million from investor money for their own use, which paid for meals, nightclubs, vacations, guns, watches, and legal fees, including a case in which McNutt allegedly used a firm-issued credit card on a $20,000 "Las Vegas nightclub wedding celebration" for Ward and a $49,000 family trip to Disney World.
He claimed that Ward and McNutt used another $22,000 of investor funds on a breathalyzer device and other expenses relating to McNutt's and a Geosyn employee's separate arrests and convictions for drunk driving during the June 2022 crypto conference.
By the end of 2022, new investor money had dried up, and Geosyn will have less than $1,900 in the bank. "Unable to make a profit because it did not have the favorable electricity contracts that defendants touted to investors," the SEC said.
But, McNutt walked away in October of 2022, leaving him with no ownership, further filing added. Ward, the SEC alleged, contacted authorities to report McNutt for embezzlement "without disclosing his own misappropriations.".
With Geosyn in "dire financial straits" by early 2023, Ward had taken to emailing investors "IOU" notes for their owed Bitcoin. In June, he announced it would file for bankruptcy, although that has never happened, the SEC said.
With the permanent injunctions, the regulator will seek return of the alleged misappropriations with penalties imposed on the three.
Geosyn, Ward, and McNutt did not return calls seeking comment.
Cheng Yuan
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