On Wednesday, April 24, the US Securities and Exchange Commission (SEC) filed a lawsuit against bitcoin miner Geosyn Mining, accusing them of defrauding over 64 investors to the tune of $5.6 million. The regulator alleges that Geosyn and its founders engaged in deceptive practices, misrepresenting mining operations and misappropriating investors’ funds for personal expenses.
The lawsuit, filed in a federal court in Fort Worth, Texas, targets Geosyn, its CEO Caleb Joseph Ward, and former operating chief Jeremy George McNutt. According to the SEC, from November 2021 to December 2022, they sold service agreements as securities, falsely claiming to purchase and operate Bitcoin miners on behalf of investors.
Allegations on Geosyn Mining
Geosyn allegedly misrepresented the number of mining rigs purchased and exaggerated mining rates and profits. While claiming to have contracts with electricity providers for cheap energy, the SEC asserts that the actual costs were significantly higher, up to 40-50% above the rates promised to investors.
Furthermore, the SEC accuses Geosyn of failing to deliver on its promises. Notably, the company initially stated that it would buy 1,400 mining rigs. However, it failed to purchase 400 of them and many of the purchased machines were never put online.
Moreover, despite promising investors the option to choose which digital asset to mine, Geosyn later restricted mining to Bitcoin only.
Falsified Documents and Misuse of Investor Funds
The SEC claims that Geosyn created falsified documents, including mining rates and profits, and made bitcoin payouts to investors to maintain the illusion of operational and profitable mining rigs. Although Geosyn earned only $320,000 from Bitcoin mining, it gave investors around $354,500 worth, falsely representing the profitability of their investments.
The lawsuit also alleges that Ward and McNutt misused investor funds for personal expenses totaling around $1.2 million. The filing reads:
“The complaint also alleges that, of the investor funds raised, Ward and McNutt misappropriated about $1.2 million for personal use and paid approximately $354,500 to investors as purported profit distributions even though Geosyn appears to have never operated profitably.”
These personal expenses include lavish meals, nightclub outings, vacations, firearms, timepieces, and legal fees. Notably, McNutt used company funds for a $20,000 Las Vegas nightclub wedding celebration for Ward and a $49,000 family trip to Disney World.
Interestingly, Ward and McNutt also spent $22,000 of investor funds on a breathalyzer device and other expenses related to McNutt’s and an employee’s separate arrests and convictions for driving under the influence during a digital asset conference in June 2022.
Background
McNutt left Geosyn while surrendering his ownership in October 2022. Two months later, Ward reported McNutt to the authorities for embezzlement without disclosing his own misappropriations, as the SEC writes.
Notably, Ward faced financial stress in 2023 and wrote “IOU” notes to investors for their owned bitcoin, falsely claiming that Geosyn would file for bankruptcy, which never occurred.
