The US Securities and Exchange Commission (SEC) has taken legal action against the crypto mining firm Geosyn and its co-founders. The commission accuses the defendants of misappropriating investor funds totaling $5.6 million.
The lawsuit, initiated due to substantial allegations of financial misconduct, aims to address the fraudulent activities of the company and its leading executives.
What is Behind SEC’s Charges Against Geosyn?
According to the SEC’s recent announcement on April 24, the authority has charged Geosyn and its executives with deceiving approximately 64 investors during 2021 and 2022. Those implicated include CEO Caleb Joseph Ward and former operations chief Jeremy George McNutt.
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“Geosyn promised investors that it would purchase, maintain and operate crypto mining machines and then distribute the mined crypto assets, such as Bitcoin, to investors for a fee,” the indictment outlined.
However, the company reportedly failed to fulfill these promises. Contrary to their claims, Geosyn did not purchase or commission the required mining rigs for earlier investors. Out of 1,400 machines that were part of the investment plan, 400 were never acquired.
Moreover, most of the purchased machines remained inactive, and Geosyn restricted its mining operations to Bitcoin alone despite indicating a broader range of cryptocurrencies to investors. The trial unfolding in a federal court in Fort Worth, Texas, has revealed more about Geosyn’s operations.
The company allegedly fabricated contracts with electricity suppliers to falsely report lower energy costs of up to 50 percent higher. This misinformation significantly misled investors about the profitability of the mining operations.
There was a manipulation in investor payouts to present an illusion of profitability. The SEC disclosed that Geosyn executed payments in Bitcoin to conceal the unprofitability of its operations. Additionally, they also supported this action by falsifying documents and profit reports.
Furthermore, the executives are accused of diverting approximately $1.2 million of investor funds for personal use, including extravagant expenses. A particularly notable allegation is that McNutt financed a lavish wedding celebration in Las Vegas with company funds.
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As investor funding ceased by the end of 2022, Geosyn teetered on the brink of bankruptcy. In a dramatic turn of events, Ward approached authorities to allege embezzlement by McNutt, yet he did not disclose any of his own financial misdeeds.
The SEC demands permanent injunctions against the defendants in response to these severe violations. Moreover, the commission also requests full repayment of misappropriated funds and appropriate penalties. Despite Ward issuing promissory notes to investors in spring 2023 and announcing a potential bankruptcy filing in June, such filing has yet to occur.
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