The U.S. Securities and Exchange Commission (SEC) has paused its fraud lawsuit against Geosyn Mining and its executives after federal prosecutors filed parallel charges against the company’s CEO, Caleb Joseph Ward, and two former executives.
The SEC agreed to stay its case, which it filed in April 2024, following the voluntary surrender of Geosyn’s CEO Ward, and former operating chief Jeremy George McNutt. The two executives appeared in a Texas federal court on February 13, a day before the SEC’s filing.
The SEC’s pause comes after an unsealed FBI affidavit on February 10 detailed accusations against Ward, McNutt, and Jared McNutt, the company’s former sales manager. The affidavit, originally filed on February 5, claims that the trio defrauded their customers while misappropriating their funds for personal expenses.
Fraudulent Operations and Lavish Spending
According to the FBI, the three executives promised customers that Geosyn would buy and host Bitcoin mining rigs for a monthly fee, allowing clients to receive a share of the mined Bitcoin. However, prosecutors allege that Geosyn did not purchase the equipment as promised. Instead, customer funds were allegedly used to finance the executives’ lavish lifestyles, including purchases of guns, luxury watches, and even a family trip to Disney World.
The executives are also accused of taking a business trip to Miami, where they racked up thousands of dollars in charges at restaurants and nightclubs using company credit cards. Additionally, the trio allegedly sent false reports to customers to make them believe their mining rigs were earning money, when in fact, they were not.
A Ponzi-Like Scheme
The prosecutors claim that the executives resorted to a Ponzi-like scheme to cover up their misdeeds. They allegedly used money from new clients to buy Bitcoin and transferred it to earlier clients, misleading them into believing that their mining rigs were operational. The executives also inflated the prices of mining rigs and misled potential customers about the actual costs, making extra profits for themselves.
In the SEC’s lawsuit, which is now temporarily suspended, the agency claims that Ward and McNutt defrauded around 64 investors out of $5.6 million between November 2021 and December 2022. The SEC alleges that the service agreements sold by Geosyn were unregistered securities, a charge that Ward has denied. The agency further claims that Geosyn failed to fulfill contracts to purchase 400 of the 1,400 mining rigs it had promised, and that most of the purchased rigs were never brought online.
Executives’ Legal Maneuvering and Impact of Political Shifts
Last week, Ward and McNutt filed a motion in response to a court request asking how the change in U.S. political leadership might affect their case. They requested that the court pause the SEC’s lawsuit while the potential impact of President Donald Trump’s crypto-friendly policies is considered. Trump has promised to relax regulatory enforcement in the crypto industry, which could influence how agencies like the SEC handle such cases.
However, in a filing the same day, the SEC asserted that its lawsuit was unaffected by political shifts or changes in enforcement priorities. The agency emphasized that the case did not involve cryptocurrency regulation and had no bearing on the current administration’s stance on crypto.
As the legal battle continues, the SEC’s case against Geosyn Mining remains on hold while federal prosecutors press forward with their fraud charges against the company’s executives.
