SEC Charges Texas Crypto Mining Firm in $5M Fraud Case, FBI Warns Crypto Users

The US SEC files charges against Geosyn Mining and co-founders over alleged fraudulent activities, while the FBI issues a warning on unregistered crypto services.

In a recent development, the US Securities and Exchange Commission (SEC) has initiated legal proceedings against Geosyn Mining, LLC, a Texas-based cryptocurrency mining and hosting company, alongside its co-founders, Caleb Ward and Jeremy McNutt. The SEC alleges that between November 2021 and December 2022, the company and its co-founders raised approximately $5.6 million from over 60 investors under false pretenses.

The complaint contends that Geosyn misled investors by promising to purchase, operate, and distribute cryptocurrency assets mined by mining machines, like Bitcoin (BTC), for an undisclosed fee. However, the SEC asserts that Geosyn and its executives made misleading statements, failed to disclose crucial information, and did not fulfill the promised services outlined in their offering documents.

Among the alleged falsehoods were claims of favorable contracts with electricity providers to ensure profitable mining machine operations. Moreover, Geosyn purportedly failed to inform new investors about unfulfilled obligations to previous investors and neglected to disclose its failure to deliver promised services, including personalized mining strategies and continuous onsite monitoring.

Ward and McNutt are accused of misappropriating around $1.2 million for personal use and distributing approximately $354,500 to investors as supposed 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, seeking permanent injunctions against all defendants, officer-and-director bars, disgorgement with prejudgment interest, and civil penalties, particularly against Ward and McNutt.

Additionally, the US Federal Bureau of Investigation (FBI) has issued a warning to American citizens regarding the usage of unregistered cryptocurrency money-transmitting services. Through its Internet Crime Complaint Center (IC3), the FBI cautioned individuals against engaging with services that do not comply with federal law and anti-money laundering (AML) regulations.

The Bureau stressed the importance of utilizing cryptocurrency money-transmitting services registered as Money Services Businesses (MSBs) and adhering to the necessary protocols to combat potential illicit financial activities conducted by such entities. According to the FBI, individuals who use unlicensed crypto money transfer services may face financial disruptions during law enforcement actions, particularly if their cryptocurrency holdings are intermingled with funds acquired through illegal means.

The statement concluded with a stern warning that cryptocurrency money transmitting services found to intentionally violate the law or facilitate illicit transactions will be subject to investigation by law enforcement agencies. Utilizing services that neglect their legal obligations may result in individuals losing access to funds following law enforcement operations targeting these businesses.

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