SEC charged Geosyn miner with a $5,6 million fraud scheme

Executives paid dividends to investors at the expense of newly recruited participants

26.04.2024 - 08:32

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3 min

What’s new? The US Securities and Exchange Commission (SEC) has charged Texas-based mining company Geosyn and its co-founders Caleb Ward and Jeremy McNutt with unregistered and fraudulent securities offerings. Officials allege that between November 2021 and December 2022, they raised $5,6 million from more than 60 investors, while failing to fulfill voiced commitments.

Press release

What else is known? According to the lawsuit, Geosyn told investors that it would buy, maintain, and operate mining rigs and then distribute mined crypto assets, such as bitcoin, to investors for payment of fees.

In doing so, the SEC said, the company did not actually provide the promised services, such as the purchase and commissioning of the mining rigs, as well as the ability to personalize crypto asset mining strategies and 24/7 monitoring of the devices. In addition, the defendants falsely claimed that the company had favorable contracts with electricity providers that would ensure the profitability of the rigs.

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The lawsuit alleges that of the investor funds raised, Ward and McNutt misappropriated about $1,2 million for personal use. They spent it on traveling, buying guns, and watches, and paying lawyers after using the company’s account to pay for a Las Vegas wedding reception and drunk driving.

The defendants paid investors about $354 500 in purported profit distributions, “even though Geosyn appears to have never operated profitably,” officials note. Operating like a pyramid scheme, by the end of 2022, the company had used up investor funds and had less than $1900 in its bank account.

Meanwhile, back in October 2022, McNutt resigned and relinquished ownership, and Ward allegedly contacted authorities to report a colleague’s embezzlement without disclosing his own misappropriations, the SEC said.