SEC charges Texas mining company and co-founder with $5.6 million fraud
The U.S. Securities and Exchange Commission (SEC) has charged Geosyn, a Texas-based cryptocurrency mining and hosting company, and its two co-founders, Caleb Ward and Jeremy McNutt, with fraud for their alleged involvement in a $5.6 million fraud scheme.
“Nearly all of Defendants’ claims about Geosyn’s purchase and operation of mining rigs contained elements of falsehood,” the agency said. complain I submitted it on Wednesday. The SEC alleged that the defendants defrauded more than 60 investors to raise approximately $5.6 million between November 2021 and December 2022.
Geosyn failed to disclose to new investors that previous investors had never received the miners, the SEC said, adding that the company did not perform the services described in the offering document.
The agency also accused the defendants of perpetuating the fraud by falsely claiming they had lucrative contracts with power providers, but the costs were 40 to 50 percent higher than what was known to investors.
Additionally, the two co-founders reportedly misappropriated $1.2 million in funds for personal use, including family vacations and purchasing guns and watches.
To mask operational problems and deficits, Geosyn, McNutt and Ward made “periodic Bitcoin distributions” to investors, the SEC said. According to the complaint, Geosyn only raised about $320,000 through mining but distributed a total of $354,500 in Bitcoin to investors, forcing McNutt to purchase Bitcoin himself to make up the gap.
Geosyn’s funds began running low in late 2022, and McNutt resigned and relinquished his ownership of the company after Ward accused him of embezzlement, according to the complaint. In early 2023, Ward reportedly sent an email to investors stating that Geosyn would pay its Bitcoin debt at a later date.
The SEC sought a permanent injunction seeking repayment of the alleged misappropriation and imposition of penalties on the three men. “Each of the defendants acted with caution and knowingly and/or engaged in the conduct referred to with gross recklessness,” the agency said.
Geosyn did not immediately respond to The Block’s request for comment.
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