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The U.S. Securities and Exchange Commission has sued crypto mining investment company Mining Automatic and founder Zan Shaikh over an alleged $22 million fraud involving more than 380 investors.
The defendants consented to proposed judgments, but disgorgement, prejudgment interest and civil penalties remain unresolved. They have not admitted or denied the allegations, and the settlement still requires court approval.
Investors Were Promised Monthly Returns of at Least 3%
The SEC said Shaikh operated Mining Automatic through Bright Vision Distribution LLC and sold investment agreements between June 2023 and May 2025. Mining Automatic allegedly told investors their money would be used to buy and operate crypto mining equipment.
Many agreements promised a minimum monthly return of 3%, while some marketing materials said investors could earn more than 10%, depending on market conditions.
The company also represented that investors would receive 80% of mining profits for five years, while Mining Automatic would keep 20%. The SEC classified the agreements as securities and said the offering was not registered.
Only 13% of Investor Funds Went to Mining Costs
The complaint alleges that Mining Automatic spent about $2.9 million, or 13% of the funds raised, on mining equipment, electricity, and hosting services. Those operations generated about $1.1 million.
The company paid investors about $1.8 million in purported returns or complementary payments. The SEC said some of those payments came from money supplied by other investors, giving the operation characteristics of a Ponzi scheme.
More Than $20M in Investor Principal Remains Unpaid
Investor funds were allegedly used for marketing, real estate expenses, vehicles, luxury travel, expensive meals, and consumer goods. Mining Automatic stopped making investor payments by March 2025.
The SEC said more than $20 million in principle remained unpaid when it filed the complaint in Massachusetts federal court on July 20.
Proposed Judgments Leave Penalties and Repayments Unresolved
The SEC charged Shaikh and Mining Automatic with securities fraud and conducting an unregistered securities offering. Both defendants consented to proposed judgments that would permanently restrict them from violating the cited securities laws.
The proposed settlement would also bar Shaikh from serving as an officer or director of certain public companies and restrict his participation in securities offerings. Disgorgement, prejudgment interest, and civil penalties will be determined after the SEC files a separate motion, leaving the final financial consequences unresolved.
