The U.S. Securities and Exchange Commission (SEC) recently filed a lawsuit against Danh C. Vo, founder and CEO of Bitcoin mining company VBit Technologies, revealing a major mining fraud case involving thousands of investors and nearly one hundred million dollars. This lawsuit once again sounds the alarm about the risks in the mining industry.

In the complaint, the SEC accuses Vo of embezzling approximately $48.5 million of the funds raised, with as much as $5 million transferred to family members and ex-spouses. A large portion of the raised funds was not used for any mining operations at all, and asset transparency is extremely low. Even more shocking, the embezzled funds left very sparse records in the accounts.

VBit’s fraud methods are not complicated but equally deadly. The company claimed to have mining capacity far exceeding its actual operational scale, with a huge gap between the number of mining machines and the number of "custody agreements" sold. Many of the computing power and mining machines purchased by investors simply do not exist. The company even adopted a typical Ponzi scheme—using new investors’ funds to pay false promised returns to old investors. The SEC explicitly states that Vo was fully aware of the severe undercapacity of the mining machines but continued to hide the truth from investors.

In terms of marketing strategy, VBit promised investors benefits such as "no management of equipment required," "stable passive mining income," and "legitimate custody mining services." The SEC has determined these statements to be false or seriously misleading. At the same time, the investment products issued by VBit are essentially unregistered securities, violating federal securities laws.

It is worth noting that after the funds were embezzled and regulatory attention gradually increased, Vo left the United States in November 2021, and the mining machine business was also halted. Although VBit was acquired in 2022, its mining operations were completely terminated, and investor losses are irrecoverable.

The deeper warning of this case is that mining companies are most prone to two types of fraud: exaggerating hash rate indicators and concealing true costs and output data. Such custody mining and cloud mining scams have appeared multiple times in the industry, forming a mature fraud template.

The VBit incident has once again dealt a heavy blow to investors’ confidence in mining products, especially in cloud mining, custody mining, hash rate leasing, and mining agency management services. It is foreseeable that these areas will face stricter regulatory scrutiny in the future, and the funding environment will become more cautious. The entire mining ecosystem needs to rebuild a foundation of trust.