SEC Sues Mining Automatic: $22M Raised, Only 13% Reached Mining, $20M Unrecovered
SEC filing shows Mining Automatic diverted 87% of $22M raised from crypto mining into marketing and founder's personal spending.
The Securities and Exchange Commission has filed suit against Massachusetts-based Mining Automatic and its founder, Zan Shaikh, alleging that of the $22 million raised from 380 investors between 2023 and 2025, only about 13% was ever deployed into actual crypto mining operations.
According to the SEC complaint, that fractional mining allocation generated roughly $1.1 million in revenue — yet the firm paid out $1.8 million to investors over the same period, a gap the regulator says points to Ponzi-style structuring where later inflows covered earlier payouts rather than mining yield.
Where the $22 million actually went
Court filings break down the fund flows in granular detail. The SEC says $7 million — nearly a third of total capital raised — went to marketing and advertising spend aimed at recruiting new investors rather than expanding hash rate or infrastructure.
A further $500,000 was allegedly routed into unrelated business ventures tied to Shaikh, while $778,550 moved directly into bank accounts under his name. Personal expenditures cited in the complaint include $375,575 in real estate charges, $151,750 at a car dealership, $118,585 in cash withdrawals, and $76,547 on entertainment.
Yield claims that didn’t match reality
Mining Automatic’s marketing materials advertised “annual returns” of 51.5% in 2021, 46.2% in 2022, and 51.8% in 2023, positioning the platform as a passive-income vehicle built on “exclusively sourced, low-cost energy” and proprietary mining infrastructure, per the SEC filing.
Those figures sit well outside what publicly disclosed institutional mining operators have reported in comparable periods, where thin margins on electricity costs and difficulty adjustments typically compress net yields far below the 40-50% range the firm claimed to sustain across three consecutive years.
Payouts stopped, principal unrecovered
The SEC states that investor payments ceased entirely by March 2025, and none of the 380 investors has recovered their original principal, leaving more than $20 million outstanding against the $22 million originally raised.
The regulator is seeking disgorgement of ill-gotten gains, civil penalties, and an order barring Shaikh from serving as an officer or director of any public company or engaging in securities activities going forward.
The case adds to a recurring enforcement pattern where mining-yield vehicles marketed with fixed, above-market return promises are later found to have allocated only a small fraction of raised capital to the underlying infrastructure they claim to operate — a structural red flag for any product advertising guaranteed mining APY regardless of network difficulty or energy cost variance.