Texas Crypto Mining Firm And Co-Founders Face SEC Charges In $5M Fraud Allegations

The US Securities and Exchange Commission (SEC) has taken legal action against Geosyn Mining, LLC, a Texas-based crypto mining and hosting company, and its co-founders, Caleb Ward and Jeremy McNutt, over allegations of engaging in unregistered and fraudulent activities.

Geosyn’s Alleged Fraud Scheme

According to the SEC, Geosyn, Ward, the company’s CEO, and McNutt, the firm’s then-COO, raised approximately $5.6 million from more than 60 investors between November 2021 and December 2022. 

According to the complaint, Geosyn told investors it would purchase, operate, and distribute crypto assets mined by mining machines, such as Bitcoin (BTC), for an undisclosed fee. 

However, the SEC alleges that the defendants made false claims, failed to disclose material information to investors, and failed to provide the services promised in their offering documents.

The complaint also notes that Geosyn falsely claimed to have favorable contracts with electricity providers, supposedly ensuring the mining machines’ profitable operation. 

Furthermore, the crypto mining company allegedly failed to disclose to new investors that they had not purchased mining machines for some previous investors, and they did not disclose that Geosyn was not fulfilling its stated services, including personalized mining strategies and 24/7 onsite monitoring. 

The SEC also alleges that Ward and McNutt misappropriated approximately $1.2 million for personal use and distributed around $354,500 to investors as purported profit distributions despite Geosyn’s “lack of profitability.”

The SEC has filed the complaint in the US District Court for the Northern District of Texas, charging the defendants with violations of antifraud and securities-registration provisions of federal securities laws. 

Ultimately, the SEC seeks permanent injunctions against all defendants, officer-and-director bars, disgorgement with prejudgment interest, and civil penalties, specifically against Ward and McNutt.

Crypto Users Warned By The FBI

The US Federal Bureau of Investigation (FBI) has issued a warning to American citizens about using unregistered cryptocurrency money-transmitting services. 

In a statement released by the FBI’s Internet Crime Complaint Center (IC3) on Thursday, individuals were cautioned against engaging with services that do not comply with federal law and fail to adhere to anti-money laundering (AML) regulations.

The FBI emphasized the importance of using cryptocurrency money-transmitting services registered as Money Services Businesses (MSBs) and following the necessary protocols to combat alleged illicit financial activities conducted by these companies. 

According to the Bureau’s statement, individuals who use unlicensed crypto money transfer services may experience “disruptions” to their finances during law enforcement actions, particularly if their crypto holdings are commingled with funds acquired through illegal means. The statement concluded with the following warning:

Cryptocurrency money transmitting services that purposely break the law or knowingly facilitate illegal transactions will be investigated by law enforcement. Using a service that does not comply with its legal obligations may put you at risk of losing access to funds after law enforcement operations target those businesses.

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