The U.S. Securities and Exchange Commission has filed fraud charges against Texas-based crypto mining and hosting company Geosyn and its two co-founders Caleb Ward and Jeremy McNutt for alleged engagement in a $5.6 million fraud case.
“Almost everything that Defendants represented about Geosyn’s miner purchases and operations contained some element of falsity,” the agency said in a complaint filed Wednesday. The defendants allegedly defrauded over 60 investors to raise about $5.6 million between November 2021 and December 2022, the SEC claimed.
Geosyn failed to disclose to new investors that previous investors never received mining machines, the SEC complaint alleged, adding that the company didn’t perform the services outlined in its offering documents.
The agency also accused the defendants of perpetuating fraud by falsely claiming to have lucrative contracts with electricity providers, when the costs were allegedly 40-50% higher than that purported to investors.
Furthermore, the two co-founders allegedly misappropriated $1.2 million of funds for personal use such as family vacations or purchasing guns and watches.
To mask operational issues and deficits, Geosyn, McNutt and Ward made “periodic bitcoin distributions” to investors, the SEC said. According to the complaint, Geosyn raised only about $320,000 from mining but distributed a total of $354,500 in bitcoin to investors, and McNutt had to purchase bitcoin himself to fill the gap.
Geosyn’s funds started to show its bottom in late 2022, and McNutt resigned and relinquished ownership interest in the company after Ward accused him of embezzlement, the complaint said. In early 2023, Ward allegedly sent investors emails that Geosyn would pay them owed bitcoin later.
The SEC sought a permanent injunction, demanding the repayment of the alleged misappropriations and the imposition of penalties against the trio. “Each Defendant acted with scienter and engaged in the referenced acts knowingly and/or with severe recklessness,” the agency said.
Geosyn did not immediately respond to The Block’s request for comment.
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