SEC Files Suit Alleging $22,000,000 Crypto Mining Fraud Scheme
US regulators have targeted an alleged investment scheme that promised guaranteed returns from crypto mining but delivered far less than advertised.
The Securities and Exchange Commission (SEC) is suing Mining Automatic and founder Zan Shaikh, alleging the Massachusetts-based operation raised $22 million from hundreds of investors between 2023 and 2025.
“Mining Automatic’s website represented that it offered investors the opportunity to obtain recurring passive income by relying on its expertise in crypto asset mining. The website claimed that its ‘advanced operations,’ ‘cutting edge technology,’ and ‘exclusively sourced, low-cost energy’ enabled it to ‘deliver consistent returns’ in a ‘future proof’ and ‘secure’ manner. The website also claimed that Mining Automatic had obtained ‘annual returns’ of 51.5% in 2021, 46.2% in 2022 and 51.8% in 2023.”
The regulator claims that only about 13% of funds went toward actual mining operations, which generated roughly $1.1 million while paying out $1.8 million to investors, creating Ponzi-like characteristics.
The SEC alleges that investor money was spent on marketing and Shaikh splurged the funds on real estate, vehicles and personal accounts.
“Despite promising to use investors’ funds to engage in crypto asset mining, Defendants spent approximately $7 million of the $22 million in Mining Automatic investments on marketing and advertising efforts to attract new investors. Defendants also spent about $500,000 of investors’ money on Shaikh’s unrelated business ventures.
In addition, Defendants spent significant sums from the investor funds through bank accounts and on credit cards on personal expenses for Shaikh, including real estate charges ($375,575), entertainment ($76,547), a car dealership ($151,750), and cash withdrawals ($118,585). Defendants also transferred $778,550 to bank accounts owned by Shaikh.”
The SEC alleges that payments stopped by March 2025 and that no one from the pool of 380 investors got their original investment back, leaving more than $20 million in principal unpaid.
The SEC seeks disgorgement, penalties and bans on Shaikh from securities activities or corporate roles.
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