The Lead
The U.S. Securities and Exchange Commission (SEC) charged VBit Technologies and its founder, Danh Vo, with fraud on Wednesday, explicitly classifying the firm’s "mining hosting agreements" as unregistered securities. The complaint, filed in the District of Delaware, alleges Vo misappropriated $48.5 million of the $95.6 million raised from 6,400 investors.
Bitcoin (BTC) shrugged off the regulatory enforcement, holding steady at $87,000 (+0.7%) as traders treated the news as an isolated fraud rather than a systemic crackdown.
The ‘Passive Income’ Trap
The SEC’s argument hinges on the "Howey Test" application to mining hardware. While VBit purported to sell specific hardware to clients, the agency alleges the company pooled computing power (hashrate) into a single entity under its control. This decoupled investors’ returns from their specific machines, effectively creating a "common enterprise" where clients relied entirely on VBit’s managerial efforts for returns.
"Investors who purchased Hosting Agreements did so with the expectation of earning passive income and relied exclusively on VBit’s efforts to earn a profit as the investors did not possess, control, or have agency over the mining rigs."
The fraud itself was blunt. Investigators claim VBit sold hosting contracts for thousands more machines than it actually owned. Vo allegedly diverted $5 million to family members and millions more to personal gambling accounts before fleeing the U.S. in late 2021.
Institutional Context
This filing draws a sharp regulatory line between colocation (renting rack space for client-owned hardware) and cloud mining (buying a share of hashrate). By targeting the "passive income" marketing structure, the SEC is signaling that any mining service pooling resources or abstracting hardware ownership will face registration requirements. Pure-play hosting providers like Core Scientific or Riot, which strictly lease infrastructure for client-controlled machines, remain structurally distinct from VBit’s model.
