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The U.S. Securities and Exchange Commission (SEC) has taken legal action against Geosyn Mining and its co-founders, Caleb J. Ward and Jeremy G. McNutt, over allegations of fraud. The regulatory body accuses Geosyn and its executives of deceiving investors and misusing approximately $5.6 million in investor funds for personal expenses.
According to the lawsuit filed in a Texas federal court, Geosyn Mining purportedly misrepresented its operational capabilities to defraud unsuspecting investors. The complaint, filed on April 24 in the U.S. District Court in Fort Worth, Texas, outlines a series of fraudulent activities attributed to Geosyn and its top executives.
The SEC asserts that Geosyn engaged in fraudulent behavior by selling service agreements disguised as securities, thereby defrauding around 64 investors. The company, along with its CEO Ward and former COO McNutt, allegedly raised $5.6 million from investors between November 2021 and December 2022. These investments were solicited under the pretense of purchasing and operating cryptocurrency mining equipment, primarily for mining Bitcoin, and offering mined coins to investors for a fee. However, the SEC claims that Geosyn misrepresented its operational capacity and energy costs to investors.
Furthermore, the SEC alleges that Geosyn falsely claimed to have purchased 1,400 mining rigs, when in reality, it fell short of this number by 400 units. Additionally, most of the purchased machines were never deployed online as promised.
The SEC also accuses Geosyn of failing to provide the promised mining services to investors, limiting their options to mine only Bitcoin while rejecting requests to mine other cryptocurrencies. Despite the company’s claims of profitability, it reportedly earned only $320,000 but paid out approximately $354,500 to investors, with McNutt allegedly purchasing Bitcoin to cover the shortfall.
In a revelation, the SEC asserts that Ward and McNutt misappropriated approximately $1.2 million in investor funds for personal use, financing extravagant lifestyles that included lavish meals, vacations, firearms, and nightclub expenses. McNutt reportedly spent $20,000 on a Las Vegas nightclub wedding party for Ward, $49,000 on a family trip to Disney World, and $22,000 on various personal expenses.
By the end of 2022, the funds held by Geosyn had dwindled to less than $1,900, according to the SEC.
In response to these alleged offenses, the SEC is seeking permanent injunctions against the defendants, as well as officer-and-director bars. Additionally, the regulatory body seeks disgorgement of misappropriated funds and civil penalties against McNutt and Ward for violations of the antifraud and securities-registration provisions of federal securities laws.
