The U.S. 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, Mr. Vo misled investors about his business operations while misusing the funds to gamble, buy virtual currency, and give gifts to his family.
The complaint filed in the U.S. District Court for the District of Delaware alleges that Vo raised more than $95.6 million from approximately 6,400 investors between December 2018 and February 2022.
He sold “hosting contracts” that promised investors a cut of the profits from the Bitcoin mining rigs operated by VBit. Most customers chose this passive investment option rather than buying the rig themselves.
Vo misrepresented the number of mining rigs it actually had in operation, effectively selling more hosting contracts than the company could support.
“While some investors made profits, others suffered significant losses,” the complaint states. Vo knew or was reckless that the company would be unable to perform its obligations tied to the hosting agreement.
Vo, 37, exercised complete control over VBit’s promotional materials, website content, and investor account information.
The SEC said the hosting agreement is a security because investors are dependent on Vo and VBit’s profit-generating efforts.
SEC: Family received misappropriated funds
In addition to the embezzlement, Vo is suspected of transferring $5 million to family members, including his ex-wife, mother, brothers and sisters, the commission said. He reportedly left the United States with the remainder of the misappropriated funds after their divorce in November 2021.
According to the SEC, several family members have been named as relief defendants in the case and have agreed to release the funds they received, pending court approval.
VBit was acquired by Advanced Mining Group in 2022 and is now defunct. The lawsuit seeks disgorgement of ill-gotten gains, civil penalties, and a ban on Vo from participating in future securities offerings.
The lawsuit comes as Congress debates federal measures to combat cryptocurrency fraud. The bipartisan proposal would create a dedicated task force to identify and address fraud in the digital asset space.
The SEC said it wants Vo’s alleged conduct to serve as a reminder to investors that they need to carefully evaluate claims of passive income from cryptocurrencies and ensure operations are transparent and verifiable.
