A crypto mining founder was charged with misappropriating money from investors for his own purposes through an investment scheme, according to Investment News.
The Securities and Exchange Commission filed the charges against Danh C. Vo, founder and CEO of VBit Technologies Corp. He was accused of fraudulently raising over $95.6 million from approximately 6,400 investors and misappropriating $48.5 million of investor funds in connection with his bitcoin mining business called “VBit.” The SEC alleged that the customer funds were transferred by Vo into his accounts to buy crypto, gamble, and send lavish gifts to family members.
The SEC’s complaint, filed in federal court in Delaware, states that Vo solicited investors by lying to them about the nature of VBit’s business, its assets, and how he would use their money.
“According to the complaint, Vo offered and sold “Hosting Agreements” that purported to provide investors with a passive income stream through bitcoin mining—the process of using high-speed computers (known as “mining rigs”) to solve complex algorithms to validate and secure transactions on the blockchain and earn bitcoin,” the SEC stated. “The complaint alleges that Vo, through VBit, sold Hosting Agreements for far more mining rigs than VBit was actually operating. The complaint further alleges that Vo misappropriated $48.5 million from investors and used large sums of the misappropriated funds for gambling and gifts to family members before he fled the United States.”
Vo allegedly misrepresented how many mining rigs were actually operational, effectively selling more hosting agreements than the company could support.
“While some investors received returns, others suffered substantial losses,” the complaint stated. Vo either knew or was reckless in not knowing that the company could not meet the obligations tied to the hosting agreements, the SEC determined.
To cover up his activities, Vo allegedly gave investors access to online accounts that reflected false bitcoin balances, according to the SEC. Some of the investors were able to make withdrawals from the accounts, but most used the balances to pay down their hosting agreements. Vbit did not have enough money to back up the amounts shown in all of its investors’ accounts, investigators said.
The SEC disclosed that Vo transferred about $5 million to his family and former spouse and left the United States in November 2021.
Vo was charged with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC is seeking permanent injunctions, disgorgement with prejudgment interest, a civil penalty, and an officer and director bar against Vo. The complaint names as relief defendants Vo’s family members, Phuong D. Vo, My Tien Thi Nguyen, Danny H. Vo and Diem Vo. The relief defendants have consented to final judgments, subject to court approval, ordering them to pay disgorgement of ill-gotten gains.
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