The United States Securities and Exchange Commission (SEC) has initiated legal action against Geosyn Mining and its leadership for allegedly defrauding investors of $5.6 million.
The lawsuit, filed in Fort Worth, Texas, accuses the company and its co-founders of misrepresenting the scale of their operations and misusing investor funds for personal luxuries.
Details of the Alleged Misconduct
According to the SEC’s complaint, from November 2021 to December 2022, Geosyn Mining, led by CEO Caleb Joseph Ward and former COO Jeremy George McNutt, engaged in deceptive practices that misled about 64 investors.
The company sold service agreements, claiming to operate a large number of crypto mining rigs and promising low electricity costs due to favorable contracts.
However, the SEC alleges these claims were false and that actual electricity costs were significantly higher, up to 50% above the rates disclosed to investors.
The SEC further contends that Ward and McNutt did not purchase 400 of the 1,400 mining rigs they had committed to acquiring. Moreover, most of the rigs that were purchased were never operational.
Despite these discrepancies, Geosyn purportedly continued to assure investors of the profitability and operational status of their mining activities, even distributing Bitcoin payouts to suggest successful mining operations.
Extravagant Misuse of Funds
The lawsuit highlights egregious examples of personal spending using investor funds, including $1.2 million on non-business-related expenses.
Notable expenditures include thousands of dollars at nightclubs, luxurious vacations, and high-end purchases like watches and firearms.
The SEC’s filing details specific instances, such as a lavish $20,000 nightclub wedding in Las Vegas and a $49,000 family trip to Disney World, all charged to the company’s accounts.
Legal and Financial Repercussions
By late 2022, Geosyn’s financial situation had deteriorated significantly, with the company possessing less than $1,900 in its accounts, leading to an inability to sustain its operations or fulfill commitments to investors.
In a desperate move, McNutt departed the company, relinquishing ownership, and Ward attempted to pin financial mismanagement on McNutt by reporting him for embezzlement. However, this did not include an admission of his own misappropriations.
The SEC is seeking a permanent injunction against Geosyn and its founders, along with the repayment of misappropriated funds and additional penalties.
The outcome of this case could set a significant precedent for the accountability of crypto businesses and the protection of investor interests in the volatile cryptocurrency market.
As of now, representatives for Geosyn, Ward, and McNutt have not provided comments on the allegations.
