Only 13% of the $22 million raised was used for mining: SEC accuses DeFi mining companies of fraud

According to Woofun AI, the US Securities and Exchange Commission (SEC) has officially filed fraud charges against DeFi mining company Mining Automatic and its key figure Shaikh, uncovering a violation involving the misappropriation of huge sums of money.

According to the SEC allegation, Mining Automatic raised about $22 million from more than 380 investors, but the actual amount of capital invested in so-called mining operations was extremely low, with only 13 cents of every dollar spent on actual business.

According to data compiled by Woofun AI, the entity collected at least $20 million more than the amount repaid to investors, and the difference was mainly used for marketing activities to attract new investors, Shaikh's personal expenses, and other unrelated expenses. As a condition of the settlement, Shaikh and Mining Automatic agreed to accept a permanent ban, a ban on executive positions, and a ban based on a code of conduct. If approved by the court, the SEC will apply for the recovery of illegal income, pre-judgment interest, and civil penalties, but it is still unclear whether investors can receive compensation.

The investigation also extended to linked entities RankOne Ecommerce and Replic8. The SEC indicated that the two companies were linked to Shaikh and his affiliates, but did not specify the specific relationship. Victim groups are mainly concentrated between 2022 and 2025, and this timeline reveals the continuing and hidden nature of the fraud.

Notably, the US Federal Bureau of Investigation (FBI) is conducting a broader investigation involving more than 380 investors who were promised fixed returns between June 2023 and May 2025. The FBI called on victims to voluntarily submit information to assist in the investigation, and indicated that victims may seek assistance and compensation under federal or state law.

Currently, the information submitted is only in the data collection stage, and the official claim status is undecided. The proposed judgment must be reviewed by the court before the SEC can apply for a financial compensation ruling. There is still great uncertainty about the final recovery amount.