The US Securities and Exchange Commission has charged Danh C. Vo, founder and CEO of bitcoin mining company VBit Technologies Corp., with defrauding investors of $48.5 million.
According to the SEC, Vo misused the funds for gambling, cryptocurrency purchases and gifts to family members while misleading investors about the operation of his business.
The complaint, filed in the U.S. District Court for the District of Delaware, alleges that Vo raised over $95.6 million from approximately 6,400 investors between December 2018 and February 2022.
He sold “hosting deals” which promised investors a share of the profits from bitcoin mining rigs operated by VBit. Most customers chose this passive investment option rather than buying rigs themselves.
Vo misrepresented how many mining rigs were actually operating and in effect sold more hosting agreements than the company could support.
“While some investors received returns, others suffered substantial losses,” the complaint said. Vo either knew or was reckless in not knowing that the company could not meet the obligations attached to the hosting agreements.
Vo, 37, exercised full authority over VBit, including its promotional materials, website content and investor account information.
The SEC said the hosting deals qualify as securities because investors relied on Vo and VBit’s efforts to generate profits.
SEC: Family members received misappropriated funds
In addition to misappropriation, Vo allegedly transferred $5 million to family members, including his ex-wife, mother, brother and sister, the commission said. He reportedly left the US with the remaining misappropriated funds after his divorce in November 2021.
Several family members are named as relief defendants in the lawsuit and have agreed to disgorge the funds they received, pending court approval, according to the SEC.
VBit was acquired by Advanced Mining Group in 2022 and is now defunct. The action seeks to rescind ill-gotten gains, civil penalties and a ban on participating in future securities offerings.
The lawsuit also comes as Congress debates federal measures to crack down on cryptocurrency fraud. A bipartisan proposal would create a dedicated task force to identify and address fraud in the digital asset sector.
The SEC said it wants Vo’s alleged behavior to serve as a reminder that investors should carefully evaluate claims of passive income from crypto and confirm that operations are transparent and verifiable.