The Securities and Exchange Commission filed a lawsuit against Mining Automatic and its founder Zan Shaikh, alleging the Massachusetts-based operation defrauded investors in a crypto mining scheme that raised $22 million from hundreds of investors between 2023 and 2025. The SEC alleges that only approximately 13% of the funds went toward actual mining operations, which generated roughly $1.1 million while paying out $1.8 million to investors, creating characteristics resembling a Ponzi scheme. The regulator claims the operation promised guaranteed returns from crypto mining expertise but diverted significant funds to marketing, unrelated business ventures, and personal expenses, with payments to investors ceasing by March 2025.
Mining Automatic Promised Consistent Returns Through Advanced Operations
Mining Automatic's website represented that it offered investors the opportunity to obtain recurring passive income by relying on its expertise in crypto asset mining, according to the SEC complaint. The website claimed that its "advanced operations," "cutting edge technology," and "exclusively sourced, low-cost energy" enabled it to "deliver consistent returns" in a "future proof" and "secure" manner. The website also claimed that Mining Automatic had obtained "annual returns" of 51.5% in 2021, 46.2% in 2022 and 51.8% in 2023.
SEC Alleges Majority of Funds Diverted to Marketing and Personal Use
The SEC alleges that despite promising to use investors' funds to engage in crypto asset mining, defendants spent approximately $7 million of the $22 million in Mining Automatic investments on marketing and advertising efforts to attract new investors. Defendants also spent about $500,000 of investors' money on Shaikh's unrelated business ventures. In addition, defendants spent significant sums from the investor funds through bank accounts and on credit cards on personal expenses for Shaikh, including real estate charges ($375,575), entertainment ($76,547), a car dealership ($151,750), and cash withdrawals ($118,585). Defendants also transferred $778,550 to bank accounts owned by Shaikh.
Investor Payments Stopped by March 2025 With Over $20 Million Unpaid
The SEC alleges that payments stopped by March 2025 and that no one from the pool of 380 investors got their original investment back, leaving more than $20 million in principal unpaid.
SEC Seeks Disgorgement and Lifetime Bans Against Shaikh
The SEC seeks disgorgement, penalties and bans on Shaikh from securities activities or corporate roles.
FAQ
What did the SEC allege Mining Automatic and Zan Shaikh did?
The SEC alleges that Mining Automatic and founder Zan Shaikh operated a fraudulent crypto mining investment scheme that raised $22 million from hundreds of investors between 2023 and 2025, with only approximately 13% of funds going toward actual mining operations while the majority was diverted to marketing, unrelated ventures, and personal expenses.
How much money did investors lose in the Mining Automatic scheme?
The SEC alleges that more than $20 million in principal remains unpaid to the pool of 380 investors, with payments ceasing by March 2025 and no investor receiving their original investment back.
What relief is the SEC seeking in the lawsuit against Mining Automatic?
The SEC seeks disgorgement of improperly obtained funds, financial penalties, and bans prohibiting Zan Shaikh from participating in securities activities or holding corporate officer or director roles.
