Geosyn Mining Exec Files Motion to Dismiss SEC Fraud Charges

News | June 4, 2024 By:

On Friday, May 24, 2024, Caleb Joseph Ward, co-founder of the crypto asset mining company Geosyn Mining, filed a motion to dismiss the charges against him in a securities fraud case brought by the Securities and Exchange Commission (SEC).

The SEC had filed a complaint against Ward, Geosyn Mining, and other defendants in April, alleging that they conducted an unregistered securities offering and engaged in fraud when selling “investment contracts” called Client Services Agreements (CSAs) related to bitcoin mining. However, Ward’s lawyers argued in the motion that the SEC’s complaint should be thrown out, as it fails to prove the CSAs met the definition of “investment contracts.”

Securities laws only give the SEC authority to regulate financial instruments that are considered securities. While the term “investment contract” is included in the definition of a security, determining whether something truly qualifies depends on the test established by the 1946 Supreme Court Howey case. Under the Howey test, an agreement must involve an investment of money in a common enterprise, with profits derived solely from the efforts of others.

Ward’s attorneys claimed the SEC’s complaint lacked sufficient details about the terms of the CSAs to demonstrate they met the Howey test. It did not show the money invested was part of a pooled fund that relied on the company’s expertise, or that profits were solely determined by Geosyn Mining’s work rather than market forces. The motion stated simply providing bitcoin mining hardware, electricity, and maintenance was not enough to constitute an expertise investors depended on.

If the CSAs were not investment contracts, then the SEC would have no jurisdiction over the case. Ward’s lawyers argued many data center companies could be considered securities under an overly broad interpretation. They noted the complaint implied investors retained control over aspects like which crypto to mine.

While the SEC complaint focused on allegations of misrepresentation and fraud, Ward maintained these claims alone did not establish the transactions involved securities. If the court agrees the SEC has not proven the CSAs met the Howey test, it could dismiss the charges for lack of subject matter jurisdiction or standing.

Please contact BlockTribune for access to a copy of this filing.