Class Action Alleges VBit Bitcoin Mining Scam No More than ‘Classic Ponzi Scheme’

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A proposed class action alleges VBit Technologies, Advanced Mining Group and several individuals engaged in a fraudulent Bitcoin mining scam that in reality functioned as “a massive Ponzi scheme” that paid out the promised cryptocurrency only as long as new victims continued to provide additional funds. 

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The 49-page lawsuit says that although the VBit scheme promised the sale, leasing and servicing of specialized computer hardware capable of producing a steady stream of Bitcoin for customers, the defendants, in truth, conspired to recruit consumers to enter into contracts to buy the machines and then wholly failed to follow up on their promises. As the case tells it, the defendants’ Bitcoin mining scheme was “fueled by multi-level marketing” as customers were pushed to recruit friends, family and colleagues to “become new victims.” 

According to the suit, the defendants fraudulently induced consumers to buy Bitcoin mining machines, which are powerful enough to run the resource-intensive programs necessary to verify the transactions on the Bitcoin blockchain, that did not exist while incentivizing their customer sales force with “Bitcoin bonuses” added to their virtual wallets and “the lure of luxury vacations, boats, and sports cars” for hitting certain recruiting goals. 

More specifically, the defendants promised that through their Bitcoin mining packages, customers would lease, and eventually be able to buy, computer hardware hosted in VBit’s facilities, the suit says. Customers were also promised that, over time, they would accumulate Bitcoin to keep in a virtual wallet, which could be used to buy additional mining packages from the defendants or held as an investment, the complaint states. 

Although the defendants claimed proposed class members could earn commissions and increase the computing power of their own Bitcoin mining packages if they recruited friends and family, the advertised offerings were “a complete sham” as the companies and individuals did not actually lease or sell the hardware they claimed to control and host in their data centers, the suit alleges. 

“In other words, rather than generating new Bitcoins as promised, Defendants moved funds from more recent customers into the accounts of earlier-in-time customers to give the false appearance of a prosperous business,” the lawsuit summarizes, claiming VBit grew its base to roughly 15,000 customers worldwide as of June 2022. 

By design, only 21 million Bitcoins will ever be created, and more than 19 million have already been mined, the lawsuit states. This limited supply drives among some consumers a fear of missing out on what could be a lucrative business opportunity, the case relays. Although at one time Bitcoin mining could be done with a standard home computer, today most Bitcoin mining takes place in large data centers in colder climates and places where energy is relatively inexpensive, the complaint adds.

When the price of Bitcoin sank from a high of nearly $69,000 in November 2021 to around $35,000 in January of this year, the defendants “realized they could no longer sustain their house of cards” and attempted to conceal their fraudulent scheme and avoid responsibility for its impending collapse, the lawsuit says. To do this, the suit says, the defendants “sold” VBit Tech to Advanced Mining, who the case describes as a purportedly “Asian-based company” with “global” cryptocurrency operations. 

Per the case, however, there is no evidence that Advanced Mining existed prior to the “sale,” or evidence that the company’s CEO exists. 

“Rather, the Advanced Mining ‘sale’ was merely a ploy for Defendants to duck responsibility and permit them to continue victimizing customers before the inevitable collapse,” the filing says. 

By June, the price of Bitcoin dipped to below $20,000, and the defendants could no longer attract enough new customers to keep the scam going, the lawsuit claims. In response, the defendants allegedly froze customers’ virtual wallets, preventing them from accessing the Bitcoin in their possession, and allegedly continued using the computer hardware supposedly sold to proposed class members for their own benefit. 

According to the suit, the VBit Bitcoin mining scheme continues to operate despite Advanced Mining sending an email to customers as recently as June 2022 stating that the U.S. Securities and Exchange Commission has indicated the company’s products and services are unregistered securities. The lawsuit alleges the defendants have violated the federal Racketeer Influenced and Corrupt Organizations Act (RICO), claiming the defendants are “opportunists” who have preyed upon cryptocurrency consumers. 

The case looks to represent all persons or entities who, at any time through the present, entered into an agreement to buy, acquire or lease Bitcoin mining equipment from VBit, Advanced Mining or any other defendant. 

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