Regulators pause fraud case as prosecutors file charges against crypto executives.
SEC Lawsuit Put on Hold
The Securities and Exchange Commission (SEC) has suspended its fraud lawsuit against Geosyn Mining after federal prosecutors brought criminal charges against its CEO and former executives. The decision follows the arrests of Geosyn CEO Caleb Joseph Ward and former operating chief Jeremy George McNutt.
Federal Charges Against Geosyn Executives
On Feb. 14, the SEC requested a stay in its case, which was originally filed in April 2024. This comes after Ward and McNutt turned themselves in and made their first court appearance. The charges against them allege large-scale fraud and misappropriation of investor funds.
FBI Investigation Unveils Fraudulent Activities
A Feb. 5 affidavit unsealed on Feb. 10 revealed that Ward, McNutt, and former sales manager Jared McNutt defrauded clients by falsely promising to purchase and host Bitcoin mining rigs. Instead, prosecutors allege the executives used customer funds for personal expenses, including luxury goods and vacations.
Lavish Spending with Client Funds
Court documents reveal that the accused used investor funds to buy expensive watches, firearms, and fund a Disney World trip. They also allegedly spent thousands at Miami nightclubs and restaurants using company credit cards.
Misleading Clients with Fake Reports
The FBI affidavit claims Geosyn executives provided false reports to investors, leading them to believe their mining rigs were operational and generating profits. Additionally, they allegedly used funds from new clients to pay earlier investors without disclosing that the mining rigs were non-functional.
Price Manipulation and Deceptive Practices
Prosecutors say the executives lied to clients about mining rig costs to pocket extra profits. A spreadsheet allegedly maintained by the firm detailed real prices versus inflated prices charged to investors. The SEC claims this scheme defrauded 64 investors out of $5.6 million between November 2021 and December 2022.
SEC Claims Unregistered Securities Sales
According to the SEC, Geosyn sold fraudulent service agreements as unregistered securities. Ward has denied these allegations. The agency also asserts that Geosyn failed to purchase 400 of the 1,400 mining rigs it had contracted for, leaving most purchased rigs offline.
Legal Strategy and Political Impact
Ward and McNutt recently argued for a pause in the SEC case, citing the new administration’s crypto policies. They claimed potential changes in SEC enforcement under Donald Trump’s leadership could impact the case. However, the SEC rejected this reasoning, stating its case does not involve cryptocurrency regulation.
Future of the Case
As the criminal proceedings move forward, the SEC’s civil case remains on hold. Legal experts predict that federal prosecutors’ actions could lead to severe penalties for the Geosyn executives if found guilty.
Disclaimer:
The information provided on 13Desk is for informational purposes only and should not be considered financial advice. We strongly recommend conducting your own research and consulting with a qualified financial advisor before making any investment decisions. Investing in cryptocurrencies carries risks, and you should only invest what you can afford to lose. 13Desk is not responsible for any financial losses incurred from your investment activities.
