The claim
Here is the pitch, in the words the complaint attributes to Mining Automatic’s own marketing.
The company “offered investors the opportunity to obtain recurring passive income by relying on its expertise in crypto asset mining,” per the complaint’s summary of its website, which also promised to “deliver consistent returns” in a “future proof” and “secure” manner.
The mechanics were framed as effortless: “Once your account is connected you just sit back and allow funds to be mined and sent to your account.”
And the number: “Your investment ensures a guaranteed return percentage, offering a minimum of 3% monthly returns with the potential to earn up to 10%+.”
Structurally, investors signed agreements entitling them to 80% of the profits from their share of the mining operation over a five-year term, with the company keeping 20%. Marketing materials cited a track record of annual returns of 51.5% for 2021, 46.2% for 2022 and 51.8% for 2023.
Steelmanned, this is not absurd on its face. Crypto mining is a real activity that produces real revenue. Hosted mining — where you own hardware someone else racks, powers and maintains — is a real service that legitimate operators sell. A revenue share on hosted hardware is a coherent product. The claim is not that mining exists; it is that this particular arrangement converted your capital into recurring income without your involvement.
The evidence
Exhibit one: where the money is alleged to have gone. The complaint’s central arithmetic is the reason this case is worth reading. It alleges that of roughly $22 million raised, approximately $2.9 million — about 13% — was paid to the third-party mining and hosting vendor that would have done the actual mining. The SEC’s litigation release puts it directly: “Despite their representations that they would use investors’ funds to engage in crypto asset mining, Shaikh and Mining Automatic used only about 13% of investors’ funds” on real mining expenses.
| Alleged flow of funds | Amount | Share of $22M |
|---|---|---|
| Raised from 380+ investors | ~$22,000,000 | 100% |
| Paid to the third-party mining vendor | ~$2,900,000 | ~13% |
| Spent on marketing to recruit new investors | ~$7,000,000 | ~32% |
| Paid out to investors as “returns” | ~$1,800,000 | ~8% |
| Revenue the real mining actually generated | ~$1,100,000 | — |
| Investor principal alleged unrepaid | >$20,000,000 | >90% |
All figures per the SEC complaint and litigation release, 20 July 2026.
Read the marketing row against the mining row. The complaint alleges more than twice as much investor money went into acquiring the next investor as went into the activity investors were told they were funding. That inversion is the whole autopsy. If accurate, the enterprise was not a mining business with a marketing budget; it was a marketing business with a mining line item.
Exhibit two: the arithmetic that cannot close. Take the alleged numbers at face value and the promise was unpayable from operations. Real mining is alleged to have produced about $1.1 million in revenue. The guaranteed floor of 3% monthly on $22 million would be roughly $660,000 per month, or nearly $8 million a year. The complaint alleges about $1.8 million was actually distributed to investors in total — more than the mining revenue itself, and a fraction of what was promised.
The SEC says the structure carried “some of the hallmarks of a Ponzi scheme.” We quote that hedge precisely, because the agency chose it deliberately and we are not going to upgrade it.
Exhibit three: a track record for years the company is alleged not to have existed. The marketing cited annual returns of 51.5% for 2021 and 46.2% for 2022. The complaint alleges Mining Automatic “was not in operation in 2021 or 2022.” If that is right, the historical performance table was not an exaggeration of real results; there were no results to exaggerate.
This is the most portable lesson in the filing. A past-performance chart is the single easiest element of an investment pitch to fabricate, and the hardest for a prospect to check. It requires no product, no customers and no accounting — only a spreadsheet.
Exhibit four: what one investor actually received. The complaint describes an investor identified as Investor 1, a US Army servicemember, who invested $25,000 in October 2024. The single payment received, in February 2025, was worth approximately $63 in Bitcoin — a return of about 0.25% against a promised minimum of 3%. Payments to investors are alleged to have stopped entirely by March 2025.
We are quoting this because it is the only per-investor figure the complaint provides. It is one case, disclosed by the SEC to illustrate its theory. It is not an average, and we are not treating it as one.
Exhibit five: the personal spending line. The complaint itemizes alleged transfers of investor funds to Shaikh’s own accounts of $778,550, plus real estate of $375,575, a car dealership payment of $151,750, cash withdrawals of $118,585 and entertainment of $76,547. Again: alleged, itemized in a pleading, not established at trial.
What the evidence supports, and what it does not
What it supports. That a federal regulator has examined this specific operation and alleges the money did not go where investors were told. That the phrase “recurring passive income” appeared in the marketing of an enterprise the SEC says was funding distributions from new investor capital rather than from mining. And that Shaikh and the company have consented to permanent injunctions against future securities-law violations, plus an officer-and-director bar and a securities-industry bar against Shaikh. That consent is real, agreed relief — the one part of this matter that is settled rather than alleged.
What it does not support. It does not support the claim that Shaikh is guilty of fraud: he has not been found liable, and no monetary penalty has been set — the SEC says amounts are to be determined by the court. It does not support any suggestion of criminal charges; we found none, and this is a civil action. It does not support any characterization of his response, because we located none and will not invent one. And it does not support the broader claim that hosted crypto mining is inherently a scam. This is one alleged case. The failure mode it illustrates is not mining; it is the guarantee bolted onto it.
That last point is the one we would carry away. Mining revenue is variable by construction — it moves with network difficulty, hardware performance, electricity prices and the coin price. A fixed 3% monthly floor is a promise that the operator will absorb all of that variance on your behalf, indefinitely, out of an activity that does not produce fixed returns. Whatever the court eventually finds here, a guaranteed monthly percentage layered on top of a volatile revenue stream is a structural claim, and it is checkable before you wire anything: ask what pays the guarantee in a bad month.
Cause of death: pending autopsy. The subject is on the table and the incision is made, but this one does not get a cause of death until a court signs it. Our other verdicts rest on published data and arithmetic. This one rests on allegations, and we would rather leave a docket entry open than pretend a complaint is a conviction. That is also why our own numbers are published on how this site makes money — the standard we apply here is the one we accept.
What would change this verdict
- A judgment on the merits, or a court-entered finding of liability. That converts the allegations into fact and this entry from OPEN to a real stamp.
- A successful defense, or dismissal of the fraud claims. If the 13% figure is wrong or is explained by something the complaint omits, this entry says so with the same prominence.
- A monetary judgment. The disgorgement and penalty amounts are undetermined; whatever the court sets will tell us what regulators think the harm was worth.
- Evidence that the mining operation was materially larger than alleged. The 13% figure is the spine of the SEC’s theory. If the real mining spend was substantially higher, most of this autopsy has to be rewritten, and we will rewrite it.