US regulators have targeted an alleged investment scheme that promised guaranteed returns from cryptocurrency mining, but delivered far less than advertised.
The Securities and Exchange Commission (SEC) is prosecution Mining Automatic and its founder, Zan Shaikh, claim the Massachusetts-based operation raised $22 million from hundreds of investors between 2023 and 2025.
“Mining Automatic’s website represents that it offers investors the opportunity to earn recurring passive income by relying on its expertise in mining crypto assets. The website claimed that its ‘advanced processes’, ‘state-of-the-art technology’ and ‘low-cost power from exclusive sources’ enabled it to ‘deliver consistent returns’ in a ‘future-proof’ and ‘secure’ manner. The website also claimed that Mining Automatic earned ‘annualized returns’ of 51.5% in 2021, 46.2% in 2022, and 51.8% in 2023.
The regulator claims that only about 13% of the funds went towards actual mining operations, which generated approximately $1.1 million while paying out $1.8 million to investors, creating fraud-like characteristics.
The SEC alleges that investor funds were spent on marketing and that Sheikh spent the money on real estate, vehicles and personal accounts.
“Despite promising to use investor funds to engage in cryptoasset mining, Defendants spent approximately $7 million of the $22 million in auto-mining investments on marketing and advertising efforts to attract new investors. Defendants also spent approximately $500,000 of investor funds on business ventures unrelated to Sheikh.
In addition, the defendants spent large amounts of investor funds through bank accounts and on credit cards on Sheikh’s personal expenses, including real estate fees ($375,575), entertainment ($76,547), automobile trading ($151,750), and cash withdrawals ($118,585). The defendants also transferred $778,550 to bank accounts owned by the sheikh.
The SEC alleges that payments stopped by March 2025, and that no one from the group of 380 investors recouped their original investment, leaving more than $20 million of principal unpaid.
The SEC seeks to impose sanctions, sanctions, and bans on Shaikh from engaging in securities activities or corporate roles.
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