SEC Sues Over $22 Million Crypto Mining Fraud Scheme

The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Mining Automatic and its founder, Zan Shaikh, alleging that the Massachusetts-based operation raised $22 million from hundreds of investors between 2023 and 2025 through a fraudulent crypto mining scheme. The SEC claims that Mining Automatic promised guaranteed returns from crypto mining but delivered significantly less than advertised.

According to the SEC complaint, Mining Automatic’s website claimed to offer investors the opportunity to earn recurring passive income by leveraging the company’s expertise in crypto asset mining. The platform touted ‘advanced operations,’ ‘cutting edge technology,’ and ‘exclusively sourced, low-cost energy’ to deliver consistent returns, boasting annual returns of 51.5% in 2021, 46.2% in 2022, and 51.8% in 2023.

However, the regulator alleges that only about 13% of the funds raised were actually used for mining operations. The mining activities generated roughly $1.1 million, while the company paid out $1.8 million to investors, creating Ponzi-like characteristics. The SEC further alleges that investor money was diverted to marketing and personal expenses. Specifically, approximately $7 million was spent on marketing and advertising to attract new investors, and about $500,000 was used for Shaikh’s unrelated business ventures. Shaikh also allegedly spent investor funds on personal expenses, including $375,575 on real estate, $76,547 on entertainment, $151,750 at a car dealership, and $118,585 in cash withdrawals. Additionally, $778,550 was transferred to bank accounts owned by Shaikh.

The SEC claims that payments to investors stopped by March 2025, and none of the 380 investors received their original investment back, leaving over $20 million in principal unpaid. The lawsuit seeks disgorgement, penalties, and bans preventing Shaikh from engaging in securities activities or serving in corporate roles.

This case highlights ongoing regulatory scrutiny of crypto investment schemes and the SEC’s commitment to protecting investors from fraudulent practices in the digital asset space.

Source: https://dailyhodl.com/2026/07/22/sec-files-suit-alleging-22000000-crypto-mining-fraud-scheme/