The United States Securities and Exchanges Commission (SEC) filed a fresh lawsuit at the Fort Worth Federal court against the Texas-based crypto miner Geosyn Mining. In its April 24 filing, the SEC claimed that Geosyn Mining and its co-founder engaged in fraudulent activities.
The market regulators accused the Geosyn team of defrauding customers over $5.6 million. Also, the SEC stated that Geosyn’s fraudulent schemes involved the representation of false reports on the number of mining machines and the misuse of customers’ funds.
SEC File Charges Against Geosyn Mining Executives
Citing a business deal conducted between November 2021 and December 2022, the SEC noted that Geosyn chief executive Caleb Joseph Ward and former chief operation officer Jeremy George McNutt defrauded 64 investors.
The regulators noted that the two officials sold service agreements as securities. After carefully reviewing the service agreement sold by Geosyn, the SEC stated that the official presented false claims.
Firstly, the regulators noted that Geosyn’s CEO and COO obtained a cheap energy source to power crypto mining activities. In contrast, when selling the service agreement, the Geosyn official quoted the cost of electricity at a high rate of 40 to 50%.
The officials are also accused of deceiving the customer on the operation of the Geosyn. Under the service agreement, Ward and McNutt claimed to acquire around 1400 mining rigs. After assessing the Geosyn record, the SEC noted that two officials had failed to purchase 400 machines.
The regulators complained that Geosyn Mining failed to acquire new mining machinery as it had promised. The SEC also uncovered a stark contrast in the Geosyn Mining service agreement.
Geosyn Mining Official Facing Legal Charges for Defrauding Investors
While initiating the service agreement, the Geosyn team claimed that the investors could mine any crypto assets. On the contrary, Geosyn requests investors to mine only Bitcoin.
Per the service agreement, the investors received a BTC payout from Geosyn Mining to convince them that their mining rigs were operational and profitable. Geosyn published a falsified report on the mining production rates and the profits generated from crypto mining.
A review of the bogus document demonstrated that Geosyn Mining yielded $320,000 from Bitcoin mining activities. Guided by the service agreement, the Geosyn team distributed $345,000 to investors.
The difference in the revenue generated from Bitcoin attracted the attention of the SEC to probe the matter. After an extensive investigation, the SEC observed that to deceive the customers on the return generated from Bitcoin mining, McNutt bought BTC and transferred the crypto assets to Ward.
Investors Suffer Losses in Crypto Investment
The transfers aimed at concealing Geosyn’s unlawful activities. During the transfer between McNutt and Ward, the two pocketed around $1.2 million customers funds for personal use.
The probing team claimed that the two executives used customers’ funds to cover their meals, vacations, watches, nightclubs, and legal fees. Also, the SEC noted that McNutt used the company credit card to cater for bills at a wedding celebration in Las Vegas.
On the other hand, Ward used $49,000 to cover a family trip to Disney World. The SEC claimed the two used $22,000 of investors’ funds to acquire breathalyzer gadgets.
Additionally, the SEC noted that officials extended their philanthropy to their employees, friends, and relatives. The misappropriation of funds exposed Geosyn Mining to financial crisis.
In December 2022, the Geosyn bank account had only $1900 left. The Bitcoin miner failed to attain the desired profits since it lacked favorable electricity contracts. Besides a decline in profit, Geosyn Mining suffered leadership challenges after McNutt announced his plans to step down from his role at the company.
The departure of McNutt left the Bitcoin miner with professional gaps that undermined productivity at the workplace. Days after the departure of McNutt, Ward reported to the authorities the involvement of the COO in the embezzlement of customers’ funds.In his submission, the CEO did not mention his role in misappropriating customers’ funds.
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