In the SEC’s lawsuit filed in federal court in Fort Worth, Texas, dated April 24, Geosyn’s CEO Caleb Joseph Ward and former chief operating officer Jeremy George McNutt alleged that between November 2021 and December 2022, Geosyn’s CEO Caleb Joseph Ward and former chief operating officer Jeremy George McNutt made approximately 64 transactions through service agreements sold as securities between November 2021 and December 2022. It is alleged that he defrauded investors.

The SEC argues that Geosyn’s agreements to purchase and transact crypto mining for fees on behalf of customers “falsely claimed” that it had contracts with electricity suppliers for cheap energy. In reality, costs were “about 40-50 percent higher than the rates customers were told.”

The commission also alleges Ward and McNutt also lied to investors about Geosyn’s operations. It is claimed that Geosyn failed to purchase 400 of the 1,400 mining devices it promised to purchase through service agreements and “never connected most of the purchased mining devices to the internet.”

According to the lawsuit, in Geosyn’s agreements investors could choose which cryptocurrency they wanted to mine, but the firm denied requests to mine any cryptocurrency other than Bitcoin.

The SEC alleges that the firm made Bitcoin payments to investors and created false documents with “fabricated production rates and profits” to convince them that their mining devices were operational and profitable.

According to the commission’s allegations, Geosyn earned $320,000 from Bitcoin mining but distributed approximately $354,500 worth of Bitcoin to investors. To cover the shortfall, McNutt purchased Bitcoin and sent it to Ward to distribute to investors.

The SEC also alleges that Ward and McNutt spent approximately $1.2 million of investor money on personal uses such as meals, nightclubs, vacations, guns, watches and legal fees. Examples of these allegations include that McNutt used Geosyn’s credit card for a $20,000 “Las Vegas nightclub wedding celebration” for Ward and a $49,000 family trip.

The commission alleges that Ward and McNutt also used another $22,000 in investor money to pay for a breathalyzer and other expenses related to a June 2022 crypto conference incident in which McNutt and a Geosyn employee were separately caught and convicted of driving under the influence.

By the end of 2022, new investor funds have been exhausted, leaving Geosyn with less than $1,900 in the bank. “It was unable to make a profit because it did not have the appropriate power agreements that investors were told about,” the SEC says.

According to the report, McNutt left the company in October 2022 and transferred ownership. Ward reported McNutt to authorities for embezzlement without disclosing his own corruption, according to the SEC.

Geosyn, which was in “serious financial difficulties” in early 2023, sent investors “IOU” emails for the Bitcoin they owed. He later filed for bankruptcy in June, but never did, the SEC says.