The Securities and Exchange Commission has paused its fraud lawsuit against crypto mining firm Geosyn Mining and its executives after US federal prosecutors brought similar charges against the company’s CEO and two former executives.
In a Feb. 14 filing to a Texas federal court, the agency agreed to stay the case it filed in April 2024 after Geosyn CEO Caleb Joseph Ward and the firm’s former operating chief Jeremy George McNutt handed themselves over to authorities and appeared in court a day earlier.
In a Feb. 5 filing to a Texas federal court unsealed on Feb. 10, an FBI affidavit alleged Caleb Ward, Jeremy McNutt and Jared McNutt — Geosyn’s former sales manager who wasn’t named in the SEC’s suit — defrauded their customers and spent their money on personal items and expenses.
The complaint alleged the trio told their customers that Geosyn would buy and host Bitcoin (BTC) mining rigs for them for a monthly fee, and they’d receive a cut of the BTC mined.
Prosecutors alleged that in many cases, they didn’t buy the equipment as promised and “used client money to fund their lavish lifestyles.”
Instead, the executives spent customer money on guns, luxury watches, a family trip to Disney World and a purported business trip to Miami where they “ran up thousands of dollars in restaurant and night club charges on Geosyn credit cards,” it read.
An excerpt from the FBI affidavit alleging various executive personal expenses were paid using customer funds. Source: PACER
Ward and the two McNutts sent fake reports to customers to make them think their mining rigs were earning money, the affidavit said.
The trio also “used money from new clients — which the new clients believed had been used to purchase their miners — to buy Bitcoin and transfer it to the earlier clients without telling the earlier clients that their miners were not actually operating,” the complaint alleged.
Prosecutors also said the executives “would lie to potential clients about the cost of the machines” to make an additional profit and kept a spreadsheet with the real and inflated prices of mining rigs, which were “well above the stated 13-15% procurement fee that they would show to potential clients.”
Meanwhile, the SEC claimed in its lawsuit that Ward and Jeremy McNutt defrauded around 64 investors out of $5.6 million between November 2021 and December 2022. It asserted the service agreements were sold as unregistered securities — a claim that Ward has rebuffed.
The agency also claimed Geosyn failed to buy 400 of the 1,400 mining rigs it entered into agreements over and didn’t bring most of the purchased rigs online. It said Ward reported Jeremy McNutt to the authorities for embezzlement “without disclosing his own misappropriations.”
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Last week, Ward and Jeremy McNutt responded to a January request from Judge Mark Pittman asking them and the SEC how Donald Trump’s administration and new leadership at the SEC could affect the case.
The pair asked the court to hold the SEC’s case due to the twin case launched by prosecutors and to allow it to assess how Trump’s crypto-friendly policy moves would “impact the SEC’s authority, enforcement priorities, and position on this case.”
Trump has promised to ease regulatory enforcement of the crypto industry, and the SEC last month set up a crypto task force to engage with the industry and has paused some of its crypto-related lawsuits.
The SEC, in a filing the same day, said that “neither the SEC’s Crypto Task Force nor the current administration’s stance on the crypto industry should have any effect” on the case as it does not relate to crypto regulation and it didn’t allege the pair sold cryptocurrencies.
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