• The SEC has paused its fraud lawsuit against Geosyn Mining after federal prosecutors filed criminal charges against its CEO and former executives.
  • The executives are accused of misusing client funds meant for Bitcoin mining, spending money on personal expenses, and misleading investors with false reports.

The U.S. Securities and Exchange Commission (SEC) has temporarily halted its fraud lawsuit against cryptocurrency mining firm Geosyn Mining and its executives following the filing of similar criminal charges by federal prosecutors.

In a Feb. 14 filing with a Texas federal court, the SEC agreed to stay its case, initially filed in April 2024, after Geosyn CEO Caleb Joseph Ward and former operating chief Jeremy George McNutt surrendered to authorities and made their first court appearance on Feb. 13.

A separate FBI affidavit, filed on Feb. 5 and unsealed on Feb. 10, accuses Ward, McNutt, and former sales manager Jared McNutt of defrauding customers by misusing funds intended for Bitcoin mining equipment and services.

The document claims the executives told customers Geosyn would purchase and host Bitcoin mining rigs in exchange for a monthly fee, with clients receiving a share of the mined Bitcoin. However, prosecutors allege the firm frequently failed to buy the promised equipment and instead used client funds for personal expenses.

According to the affidavit, the executives spent customer money on luxury items, including guns and high-end watches, as well as personal trips. One alleged instance describes a business trip to Miami where "thousands of dollars in restaurant and nightclub charges" were charged to Geosyn's credit cards. The document further claims the company created fraudulent reports to mislead customers into believing their mining rigs were operating profitably.

The FBI also alleges that new client funds were used to purchase Bitcoin and transfer it to earlier customers, without informing them that their mining rigs were not actually operational. Additionally, the executives are accused of misrepresenting mining equipment costs to inflate profits, maintaining internal records of real and marked-up prices that exceeded the disclosed procurement fees.

The SEC’s lawsuit, which remains on hold, alleges that Ward and McNutt defrauded approximately 64 investors out of $5.6 million between November 2021 and December 2022. The agency asserts that the service agreements sold by Geosyn constituted unregistered securities, a claim that Ward has denied.

Last week, Ward and McNutt responded to a judicial request regarding how potential regulatory shifts under the Trump administration could affect the case. They requested that the SEC’s lawsuit remain paused while the criminal case proceeds, arguing that ongoing changes in crypto regulation could influence the SEC’s enforcement priorities.

The SEC, however, maintains that the case does not involve cryptocurrency regulations and should not be affected by the administration’s policy changes.

Edited by Harshajit Sarmah