The US Securities and Exchange Commission has taken the position that certain third party Bitcoin mining arrangements can qualify as securities, following the filing of a federal lawsuit tied to an alleged $48 million fraud involving mining firm VBit Technologies. In a complaint filed in a Delaware federal court, regulators accused the company and its former chief executive of misleading investors through so called hosting agreements marketed as a passive way to earn income from Bitcoin mining. The SEC emphasized that its action does not apply to Bitcoin mining itself, but rather to investment structures in which customers rely entirely on a third party to generate returns. The case signals closer scrutiny of mining related investment products that resemble pooled profit schemes rather than direct participation in network operations.
According to the regulator, VBit promoted turnkey mining contracts in which investors were told they owned mining equipment that would be operated and managed on their behalf. Returns were presented as proportional to each investor’s share of computing power, with little or no operational involvement required. The SEC alleges that these arrangements were sold as unregistered investment contracts and that the company dramatically overstated its mining capacity. Court filings claim VBit sold far more hosting agreements than it had operational equipment to support, creating a shortfall between promised and actual computing power. Regulators also argue that investors never had control over specific machines and were fully dependent on the company’s efforts to generate profits, a key factor in determining whether an arrangement constitutes a security.
The complaint further alleges that investor funds were misused, with significant sums transferred to personal accounts and deployed for unrelated purposes, while account dashboards showed fabricated balances not tied to real mining output. After regulators began investigating, the SEC says the company’s leadership moved funds offshore and later exited the United States, leaving investors unable to access their accounts. The agency is seeking permanent injunctions, financial penalties, and a ban on serving as an officer or director of a public company. The case reinforces a broader regulatory message that passive crypto investment schemes, even when linked to activities like mining, may fall under securities laws when profit expectations hinge on managerial control rather than direct ownership or participation.
