- The SEC halted its case against Geosyn Mining after federal prosecutors charged its CEO and two former executives.
- Prosecutors say Geosyn executives used customer funds for luxury items and fake reports to hide missing mining equipment.
- The SEC claims Geosyn defrauded 64 investors of $5.6 million and failed to buy 400 promised Bitcoin mining rigs.
The Securities and Exchange Commission has paused its fraud case against Geosyn Mining and its executives. The SEC agreed to halt its case in a February 14 filing to a Texas federal court. This decision came after CEO Caleb Joseph Ward and former operating chief Jeremy George McNutt surrendered to authorities and appeared in court on February 13.
FBI Alleges Misuse of Customer Funds
An FBI affidavit, unsealed on February 10, detailed allegations against Ward, McNutt, and former sales manager Jared McNutt. The document accused them of defrauding customers by misusing their funds. The regulator had not named Jared McNutt in its original lawsuit.
According to the complaint, Geosyn Mining promised clients that it would purchase and operate Bitcoin mining rigs on their behalf. In return, customers expected a share of the mined Bitcoin. However, prosecutors claim the executives failed to deliver on these promises.
Investigators found that in many cases, the firm did not buy the mining equipment as agreed. Instead, they allegedly used customer funds for personal expenses.
Lavish Spending and Fraud Allegations
Authorities stated that the executives spent customer money on luxury goods, including watches and firearms. They also funded a family trip to Disney World and covered nightclub expenses in Miami.
To conceal the fraud, Ward and the McNutts allegedly provided clients with falsified reports. These documents misrepresented mining operations and returns, leading customers to believe their investments were generating profits.
Prosecutors also accused the executives of misleading clients about mining equipment costs. They allegedly kept a spreadsheet showing the real and inflated prices of rigs. This allowed them to charge clients significantly more than the actual procurement cost.
SEC’s Allegations and Legal Proceedings
The lawsuit claimed that Ward and Jeremy McNutt defrauded 64 investors of $5.6 million between November 2021 and December 2022. The agency alleged that the company failed to purchase 400 of the 1,400 promised mining rigs. It also accused Ward of reporting McNutt for embezzlement while concealing his own financial misconduct.
Impact of Regulatory Changes on the Case
Last week, Ward and McNutt responded to a court request regarding how the SEC’s case might be affected by potential regulatory shifts under the new administration. They urged the court to suspend the SEC lawsuit while the criminal case proceeds. They also cited possible changes in crypto regulation under the Trump administration.
Despite this, the SEC stated that its case does not relate to cryptocurrency regulations. It also asserted that the newly formed Crypto Task Force should not influence the case. The agency maintained that the charges against Geosyn Mining and its executives remain independent of any policy changes.
