Heavy! The U.S. SEC lists Bitcoin mining within the scope of securities laws and sues mining company VBit for fraud of 95.6 million mg.
SEC sued VBit for nearly US$100 million in fraud and defined mining machine custody as securities, drawing the final red line for the encryption industry, which may affect mining compliance in 2026
(Preliminary summary: RWA protocol Ondo Finance explodes inside story: BlackRock and Morgan Stanley enter real-world assets)
(Background supplement: The US SEC terminates the Ondo Finance investigation case "without any charges"! $ONDO jumped and broke through 0.5 in response. USD)
Contents of this article
The U.S. Securities and Exchange Commission (SEC) recently issued heavy regulatory news. According to the SEC’s official announcement, it filed a lawsuit against the Bitcoin mining company VBit Technologies and its founder Danh C. Vo on December 17, accusing this person of defrauding nearly US$95.6 million in the name of “mining machine hosting”. The SEC also made it clear for the first time that such custody contracts are essentially securities, leaving a striking red line for crypto mining.
A Ponzi scheme under gorgeous packaging
According to the full text of the complaint, VBit raised funds from more than 6,400 investors from 2018 to 2022, claiming to "buy mining machines and collect Bitcoins while lying down", but actually misappropriated nearly half of the funds for other purposes. Danh Vo not only used his funds to gamble, buy cars, make private crypto investments, but also transferred more than $5 million to his family. What’s even more fatal is that the number of custody contracts sold by VBit far exceeds the number of mining machines in hand. When the backward funds cannot meet the previously promised returns, the entire capital pool dries up instantly.
SEC pointed out that Vo left the country in November 2021 and is currently suspected of hiding in Vietnam. All investors are left with is a stopped mining dashboard and money that is difficult to recover. This case combined the three elements of oversold, black box and cross-border absconding, and overnight it became the most shocking warning case in the crypto mining industry.
The Howey Test: Why custody became securities
What really affected the market’s nerves in the case was the legal characterization. The SEC quoted the four elements of the "Howey Test" and determined that investors did not simply buy hardware, but invested funds in joint ventures and expected others to work hard to bring benefits. Investors have no way to control the mining machine switch, electricity rate strategy or computing power direction, and profits are completely dependent on VBit's operation.
SEC emphasized in the complaint:
“The fate of investors is related to VBit The fate of the mining pool is completely tied together. Investors invest money in the hope of making profits through the professional efforts of others. "
This statement equates the joint investment characteristics of cloud mining and traditional securities, and also brings mining-related services to the radar of securities laws for the first time. In fact, similar business and capital structures are the current model of many mining companies, which commercialize and sell computing power and conduct future fundraising and promotions to potential investors.
Mining Compliance Attack and Defense
Facing the latest law enforcement, formal mining companies immediately differentiate their practices. Blockware Intelligence executive Mitchell Askew emphasized that the legal custody model should allow customers to own the mining machine, hold the private key, and decide the direction of computing power by themselves. The custodian only provides power, cooling and maintenance, charges a fixed fee, and does not participate in profit sharing. Under this setting, there is an essential difference between "equipment leasing" and "securities investment".
The industry is worried that if the policy is indiscriminate and classifies all custody contracts as securities across the board, it will force mining farms to incur expensive securities compliance costs, thereby shutting out small and medium-sized miners. But at the same time, the black box precedent left by VBit also forces mining farms to strengthen information disclosure and asset isolation mechanisms.
The market generally expects that Trump has loosened his grip on digital assets, but the VBit case has still become a ready-made case that the courts can cite. Mining operators must weigh the risks before deciding how to package their products.
