The SEC decided to pause its lawsuit against the company after similar federal charges were filed alleging that the executives engaged in Ponzi-like schemes and used investor funds for luxury expenses. Meanwhile, Pantera Capital’s Dan Morehead is under federal tax investigation over $850 million in investment profits after relocating to Puerto Rico. In India, authorities seized almost $190 million in crypto linked to the Bitconnect Ponzi scheme.
Geosyn Mining Faces Criminal Charges
The United States Securities and Exchange Commission (SEC) decided to pause its fraud lawsuit against Geosyn Mining and its executives after similar charges were filed by federal prosecutors against the company’s leadership. The agency’s decision was shared in a Feb. 14 filing to a Texas federal court, and happened after Geosyn CEO Caleb Joseph Ward and former operating chief Jeremy George McNutt surrendered to authorities and made their first court appearance. The SEC originally filed its case in April of 2024, accusing the executives of fraudulent activities tied to their cryptocurrency mining business.
Original announcement of SEC lawsuit (Source: SEC)
Court documents were unsealed on Feb. 10 and revealed details about the accusations against Ward, McNutt, and Geosyn’s former sales manager, Jared McNutt, who was not named in the SEC’s case but is implicated in the broader scheme. The complaint alleges that the trio deceived their clients by promising to buy and host Bitcoin mining equipment on their behalf in exchange for a monthly fee, with the promise of sharing the mining profits. However, prosecutors claim that in many cases, the equipment was never purchased, and customer funds were instead used to fund a lavish lifestyle. This included the purchase of firearms, luxury watches, and personal trips to Disney World and Miami.
According to the affidavit, the executives sent falsified reports to customers, which made them believe their mining rigs were operational and generating revenue. Additionally, they allegedly engaged in a Ponzi-like scheme by using funds from new clients to buy Bitcoin and transfer it to earlier clients, giving the illusion that the mining rigs were actually producing income. Prosecutors also claim that the executives deliberately misrepresented the cost of mining rigs to extract even more profits and maintained a spreadsheet documenting the real and inflated prices, which far exceeded the advertised procurement fees.
The SEC’s lawsuit alleges that Ward and Jeremy McNutt defrauded approximately 64 investors out of $5.6 million between November of 2021 and December of 2022. The agency believes that the service agreements offered by Geosyn constituted unregistered securities, which is a claim that Ward has disputed.
The SEC also alleges that Geosyn did not procure 400 of the 1,400 mining rigs it had agreements for and neglected to bring most of the acquired rigs online. In an apparent internal dispute, Ward reportedly reported McNutt for embezzlement without mentioning his own misappropriation of funds.
Recent political developments have also intersected with the case. Last week, Ward and McNutt responded to a query from Judge Mark Pittman about how the potential regulatory shift under Donald Trump’s administration could influence the lawsuit. The two requested a hold on the SEC’s case due to the parallel criminal proceedings and the need to evaluate Trump’s crypto-friendly policies, which they argued could impact the SEC’s enforcement authority and approach to the case. Despite this argument, the SEC maintained in its filing that the administration’s stance on crypto and the newly established task force should not affect the case.
Pantera Capital’s Dan Morehead Faces Tax Investigation
Dan Morehead, the founder and managing partner of Pantera Capital, is also reportedly under investigation for possible federal tax law violations after relocating to Puerto Rico. The US Senate Finance Committee (SFC) requested information about over $850 million in investment profits Morehead earned after moving to the island in 2020. A letter from Senator Ron Wyden from Jan. 9 suggested that Morehead “may have treated” these profits as exempt from US taxes.
The letter pointed out that in most cases, a large portion of gains earned by people relocating to Puerto Rico still qualifies as US-sourced income, requiring them to report it on US tax returns and pay applicable taxes. In response to this, Morehead shared that he believes he acted appropriately regarding his taxes and clarified that he moved to Puerto Rico in 2021.
Morehead founded Pantera Capital, which was the first cryptocurrency investment firm in the US. It even saw some of its early investments grow by more than 130,000%, according to a blog post he published in November of 2024. He also launched the Pantera Bitcoin Fund in 2013, with its initial Bitcoin purchase at $74 generating over 1,000 times its return. Pantera Capital now manages over $5 billion in assets, with more than 100 venture investments and 47% of its capital allocated outside the United States, according to the company’s website.
(Source: Pantera Capital)
The investigation into Morehead happened at a time of increased regulatory scrutiny on crypto taxation. In June of 2024, the Internal Revenue Service (IRS) introduced new rules requiring US crypto transactions to be subject to third-party tax reporting for the first time. Starting in 2025, centralized crypto exchanges and other brokers will have to report sales and exchanges of digital assets, including cryptocurrencies.
This move raised a lot of concerns in the industry. Some experts warned that it could push investors toward decentralized platforms, making tax revenue even harder to track.
India Cracks Down on Bitconnect Fraud
Indian authorities seized almost $190 million in crypto linked to the Bitconnect Ponzi scheme as part of an ongoing investigation into the global fraud that collapsed in 2018. The Enforcement Directorate (ED) in Ahmedabad conducted the seizure as part of its probe into the scheme, which allegedly deceived numerous investors under the guise of securities investments.
Alongside the cryptocurrency, authorities also confiscated cash amounting to approximately $15,582, a sport utility vehicle, and several electronic devices in raids that were conducted on Feb. 11 and 15 in Gujarat. The seized assets reportedly belonged to associates of Bitconnect, which is accused of defrauding around 4,000 investors across 95 countries, leading to an estimated $2.4 billion in losses. Bitconnect was founded in 2016, and lured investors with promises of high returns but collapsed just two years later.
Bitconnect’s founder, Satish Kumbhani, was charged by the US Department of Justice in February of 2022 for orchestrating the scheme. Authorities claim he built a worldwide network of promoters who were paid commissions to attract more investors into the fraudulent operation. Between November 2016 and January 2018, the scheme collected funds from investors around the world, including a large number in India.
(Source: US Department of Justice)
The fallout from Bitconnect’s collapse led to desperate attempts by some victims to recover their lost investments. In August of 2024, the Enforcement Directorate reported that an investor, Shailesh Babulal Bhatt, who suffered losses in Bitconnect Coin (BCC), took extreme measures by kidnapping two of Kumbhani’s employees. Bhatt and his accomplices allegedly extorted 2,091 Bitcoin, 11,000 Litecoin, and around $1.7 million in cash to recoup his losses.
This article was originally Posted on Coinpaper.com
