The US Securities and Exchange Commission (SEC) has filed a lawsuit against Mining Automatic and its founder Zan Shaikh, alleging a $22 million fraudulent crypto mining investment scheme that misled hundreds of investors.
Details of the Alleged Fraud
According to the SEC complaint, Mining Automatic was based in Massachusetts and operated between 2023 and 2025. The company’s website promised investors recurring passive income through crypto asset mining, claiming annual returns exceeding 46% and highlighting its advanced technology and access to low-cost energy.
However, the SEC states that only about 13% of the raised funds were used for actual mining activities, which generated roughly $1.1 million. Meanwhile, the company paid out $1.8 million to investors, displaying characteristics of a Ponzi scheme.
Investor money was allegedly diverted to marketing expenses, unrelated business ventures, and personal expenditures of Shaikh. The SEC notes that approximately $7 million was spent on marketing to attract new investors, $500,000 went to Shaikh’s other businesses, and significant sums were used for real estate, entertainment, car purchases, and cash withdrawals.
Payments to investors ceased by March 2025, with none of the 380 investors recovering their initial investments. The principal loss exceeds $20 million according to the SEC.
Regulatory Actions and Implications
The SEC is pursuing disgorgement of funds, civil penalties, and bans preventing Shaikh from participating in securities activities or holding corporate positions. This case highlights ongoing regulatory scrutiny of crypto investment schemes promising high returns but failing to deliver.
Investors are reminded to exercise due diligence in the crypto sector, as seen in recent cases where fraudulent or misleading operations have been exposed. For context on regulatory challenges in crypto investments, see related coverage on crypto research firm closures.
This material is for informational purposes only and does not constitute financial advice.
