The company allegedly provided false information about the scope of its operations
In a lawsuit filed by the US Securities and Exchange Commission (SEC), Geosyn Mining and its co-founders have been accused of defrauding investors by falsely claiming the number of crypto mining rigs in their possession while misappropriating customer funds for personal use, resulting in losses of $5.6 million.
On April 24, the SEC filed the suit against Geosyn, CEO Caleb Joseph Ward, and former COO Jeremy George McNutt in a Fort Worth, Texas, federal court. The lawsuit alleges that the defendants defrauded around 64 investors by selling service agreements as securities between November 2021 and December 2022.
In its complaint, the SEC asserted that Geosyn “falsely claimed” to have contracts with electricity providers for inexpensive energy when, in fact, the costs were “as high as 40-50% above” the rates communicated to customers.
Additionally, the SEC says Ward and McNutt deceived investors about Geosyn’s operations. Of the 1,400 mining rigs Geosyn had agreed to acquire, they failed to buy 400 units and “never brought most of the purchased mining machines online.”
The regulator said the company made Bitcoin payouts to investors so they would “believe that their mining machines were operational and profitable when they were not.”
The SEC also alleges that Ward and McNutt diverted approximately $1.2 million in investor funds for personal use, including Ward’s $20,000 “Las Vegas nightclub wedding celebration” and a $49,000 Disney World vacation.
In early 2023, with Geosyn in “dire financial straights,” Ward sent investors “IOU” notes to record their owed Bitcoin before declaring the company would file for bankruptcy in June. However, the SEC says the filing never happened.
The regulator seeks a permanent injunction, demanding the repayment of the misappropriated funds and imposing penalties against the defendants.
