The United States Securities and Exchange Commission has filed a formal lawsuit against the company VBit Technologies and its founder, Danh C. Vo. The regulator argues that contracts offered under the third-party Bitcoin mining modality constitute unregistered and illegal securities. According to the court document, the entity deceived thousands of people through a scheme that promised constant passive income. Therefore, this case sets a critical precedent on how these financial services are supervised.
Danh C. Vo, former CEO of the firm, is accused of orchestrating a fraud of approximately forty-eight million dollars in total. Investigations reveal that the company raised more than ninety-five million dollars from thousands of retail investors globally. Likewise, the official SEC spokesperson, Hassan Shittu, indicated that the company used deceptive hosting agreements to lure users. In this way, participants were attracted with the promise of a turnkey solution that avoided technical complications.
The regulatory body clarified that this classification does not apply to direct crypto-asset extraction carried out by individuals independently. The distinction lies in the fact that VBit customers relied entirely on the administrative efforts of the third party. On the other hand, the company promoted tiered packages that supposedly granted ownership over specialized high-performance mining machines. However, real control of the equipment was never in the hands of the final buyers at any time.
A regulatory distinction that redefines digital asset ownership in the current financial market
The SEC argues that these hosting agreements satisfy the criteria of the Howey test to be considered financial securities. Reliance on centralized management transforms a technical activity into an investment that requires mandatory legal registration. Therefore, the internal economy of projects offering “cloud mining” must adapt to these transparency requirements very soon. However, many current platforms operate under similar structures that could now be under federal scrutiny and investigation.
VBit’s accounting records show that the company sold contracts for a processing capacity that simply did not exist. In the year 2021, the firm sold agreements for eight thousand rigs, but only operated over sixteen hundred. Additionally, the founder allegedly diverted funds to personal accounts and distributed millions among his relatives before leaving the country. For this reason, investors discovered that their online balances were fabricated figures without any real physical backing.
What impact will this decision have on other companies offering hosting services?
The mining services market could face a profound restructuring due to this new approach by the United States supervisory authorities. Investors must now verify if external hashrate providers have the necessary permits to operate legally and safely. Likewise, the price of related assets could experience volatility if similar operations are closed due to lack of compliance. For this reason, due diligence becomes an indispensable tool for any participant in the sector today.
Finally, the fate of Danh C. Vo and the recovery of assets will depend on the outcome of the requested jury trial. The SEC seeks permanent injunctions and severe civil penalties to prevent these mass fraud schemes from happening again. On the other hand, thousands of users remain with their accounts locked since mid-2022 without clear hopes for recovery. Therefore, the cryptographic sector continues to wait for signals of greater clarity to protect users’ capital effectively.
