SEC Sues VBit, Says Some Bitcoin Mining Hosting Are Securities
The United States Securities and Exchange Commission asserted in a new lawsuit that certain third-party Bitcoin (BTC) mining hosting arrangements may constitute securities offerings, advancing the claim as part of an action against VBit and its founder, Danh Vo.
The SEC filed the case in Delaware federal court on Wednesday, alleging that from 2018 to 2022 the defendants defrauded investors and misappropriated approximately $48 million by selling more hosting agreements than there were mining rigs to support them.
The complaint contends that VBit’s hosting agreements are investment contracts under the Howey test. According to the agency, purchasers expected passive income and depended entirely on VBit’s efforts to generate returns because they did not possess, control, or exercise authority over the mining equipment they believed they had bought.
SEC alleges VBit deviated from industry norms
The SEC claims VBit’s operation fell short of standard industry practices, asserting that investors were unable to monitor their rigs and that the company retained full operational control.
The regulator also alleges VBit directed hashrate into a mining pool it controlled, which was central to its securities classification. The filing states that investors’ potential profits were tied to the overall performance of the broader VBit mining pool and that recruiting more participants increased the chances of earning additional Bitcoin.
Industry response and potential implications
Mitchell Askew, head of Blockware Intelligence, said pooling hashrate is not standard practice for hosted Bitcoin mining service providers.
“Hosted Bitcoin mining simply means a client purchases a computer and electricity,” he said, adding that there is typically no pooling of capital, no profit-sharing, and no dependence on a promoter for returns. He argued that such arrangements are clearly not securities under the Howey test and said the case should not impact legitimate hosted mining providers.
The SEC did not immediately respond to a request for comment.
Several high-profile crypto investigations initiated by the agency in recent years have been dropped, while many fraud-related cases remain ongoing.
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