The US Securities and Exchange Commission has filed a lawsuit against Massachusetts-based Mining Automatic and its founder, Zan Shaikh, accusing them of running a crypto-mining investment scheme that raised about $22 million from roughly 380 investors. The regulator says the business marketed passive income and high annual returns, but used only a small share of investor money for actual mining operations.

Promised returns and fundraising

According to the SEC, Mining Automatic told investors they could earn recurring passive income through the company’s crypto-asset mining expertise. The firm’s website allegedly described its operations as advanced, secure and “future proof,” and said low-cost energy and technology would support consistent results.

The complaint says the company pointed to claimed annual returns of 51.5% in 2021, 46.2% in 2022 and 51.8% in 2023. The SEC alleges that between 2023 and 2025, those representations helped Mining Automatic and Shaikh collect approximately $22 million from hundreds of investors.

How the money was allegedly used

The SEC claims only about 13% of the money raised was actually directed to mining activity. Those operations allegedly generated around $1.1 million, while the company paid about $1.8 million to investors. The regulator says that mismatch gave the operation Ponzi-like characteristics, with investor payouts not supported by the underlying business.

The complaint further alleges that around $7 million of investor funds went to marketing and advertising to bring in new participants rather than to mining infrastructure or operations. The SEC also says about $500,000 was spent on Shaikh’s unrelated business ventures.

Personal spending allegations

Beyond business-related spending, the SEC accuses Shaikh of using investor money for personal expenses. The filing alleges spending that included $375,575 on real estate charges, $76,547 on entertainment, $151,750 at a car dealership and $118,585 in cash withdrawals. It also alleges that $778,550 was transferred to bank accounts owned by Shaikh.

The regulator says these uses of funds were inconsistent with the company’s representations that investor capital would be deployed for crypto mining.

Investor losses and SEC demands

The SEC alleges payments to investors had stopped by March 2025. It further claims that none of the 380 investors recovered their original investment, leaving more than $20 million in principal still unpaid.

In the lawsuit, the agency is seeking disgorgement, civil penalties and orders that would bar Shaikh from taking part in securities-related activities or serving in corporate roles.

The case adds to a broader pattern of US regulatory actions targeting crypto-related investment programs that advertised steady or outsized returns while allegedly using investor funds in ways that differed from their public pitch. The allegations remain those of the SEC and are set out in its complaint.

Source: dailyhodl.com