Tech
SEC Takes Action Against Geosyn Mining Over $5.6 Million Cryptocurrency Mining Scam
The US Securities and Exchanges Commission (SEC) has filed a lawsuit against Geosyn Mining and its co-founders for alleged fraud. The regulator alleges that Geosyn and its co-founders, Caleb J. Ward and Jeremy G. McNutt, deceived investors and spent $5.6 million in investor funds for their own use.
The lawsuit filed in a Texas federal court alleges that Geosyn Mining lied and misrepresented its operational ability to defraud unsuspecting investors.
SEC Crackdown on Geosyn Mining: Allegations of Fraud and Misrepresentations Revealed
April 24th archived in U.S. District Court in Fort Worth, Texas, highlighted a series of fraudulent activities allegedly committed by Geosyn and two of its executives.
The securities regulator alleges that Geosyn defrauded around 64 investors by selling service contracts disguised as securities. The document notes that Geosyn, its CEO Ward and former COO McNutt raised $5.6 million from 64 investors between November 2021 and December 2022.
The parties promised to purchase and operate equipment for mining cryptocurrencies such as Bitcoin and to release mined coins to investors for a fee. Furthermore, the company falsely claimed that it had good deals with electricity suppliers and could purchase energy at an affordable price. However, in reality, the energy cost was up to 40-50% higher than what Geosyn declared to customers.
Additionally, Geosyn lied about the number of mining equipment it purchased. In the service agreements it allegedly claimed to have purchased 1,400 mining facilities. However, the purchased equipment was less than 400 units. Furthermore, most of the machines purchased have never been used online.
Furthermore, the SEC said the company failed to provide the promised service, such as allowing investors to choose their own mining strategy and coins to mine. Instead, it only allowed investors to mine Bitcoin while rejecting requests to mine more Bitcoin cryptocurrencies.
The regulator said Geosyn made investors believe its business was profitable when it was not. The company earned just $320,000, but paid investors about $354,500. McNutt bought bitcoin and gave it to Ward to distribute to make up the difference.
Misuse of Funds and Violations by Geosyn Founders, SEC Alleges
The SEC complaint alleges that Geosyn CEO Ward and former COO McNutt misappropriated investor funds for their own personal use. The statement said the cofounders diverted approximately $1.2 million from investor funds to finance lavish lifestyles.
The duo misappropriated approximately $1.2 million in client funds for expensive meals, vacations, firearms, nightclubs, etc. The SEC court filing says McNutt spent $20,000 in company funds on a wedding party at a Las Vegas nightclub for Ward. She spent $49,000 on a family trip to Disney World and $22,000 on a breathalyzer and other expenses.
By the end of 2022, Geosyn’s investor funds in custody had shrunk dramatically, with less than $1,900 remaining in the company’s account.
Based on the alleged crimes, the SEC charges the defendants with violations of the anti-fraud and securities registration provisions of the federal securities laws.
The regulator seeks permanent injunctions against the defendants and injunctions against officers and directors. The SEC is also seeking return of the stolen funds and civil penalties against McNutt and Ward.