Crypto firm VBit Technologies faces multiple lawsuits, Ponzi scheme allegations

VBit Technologies, the South Philadelphia-based cryptocurrency mining firm accused of scamming Bitcoin newcomers out of large investments, has been hit with three new civil lawsuits from investors who say they were duped by a “huge Ponzi scheme”.

Federal filings in Pennsylvania and Delaware allege that VBit used an intricate pyramid marketing scheme to acquire new vulnerable customers. In return for their recruiting efforts, the firm promised inexperienced investors spending bills on luxury clothing, watches and exotic vacations.

The documents also allege that company executives lied to customers about their products, with one lawsuit suggesting they were engaged in racketeering activities.

The developments come amid high-profile crashes in the cryptocurrency world, including the November crash of cryptocurrency exchange FTX that saw that company, led by billionaire Sam Bankman-Fried, file for bankruptcy after facing an $8 deficit billion.

While the local fallout from the FTX fiasco was minimal, VBit aggressively courted investors throughout the Philadelphia region during the heyday days of Bitcoin’s rise and before it fell below 50% of its value.

Headquartered in an unassuming brick building along Washington Avenue, VBit Technologies says it was sold to Chinese firm Advanced Mining Group, an undocumented firm, earlier this year for $105 million. In June, when clients began noticing that Bitcoin in VBit-controlled accounts was inaccessible, a former executive estimated the company had around 15,000 investors worldwide.

The company’s 34-year-old founder, Don Vo, disappeared from public view shortly after the reported sale. Prior to that transaction, VBit executives bragged on social media videos about gifting luxury sports cars to their top performers, sailing on a private yacht, and dining at Philadelphia’s most expensive restaurants.

Attorneys representing VBit Technologies and its executives denied wrongdoing in response to a complaint filed in September. The company’s attorneys did not respond to recent requests for comment on the new complaints. In emails it sent to its customers this fall, the company said it would start issuing refunds. No criminal charges were filed.

A class action lawsuit filed in November in Delaware argues that VBit “functioned like a huge Ponzi scheme that paid out the promised Bitcoins only as long as new victims provided additional funds to do so.”

That lawsuit was filed by two Philadelphia men, Ross Dettmering and Francis Mangubat, and is one of three filed in Delaware’s only federal court this fall. In Philadelphia, plaintiff Michael Enno alleged fraud in a complaint filed in October in Eastern District Court of Pennsylvania.

No trial dates have been set, however, a lawsuit filed in September was assigned to a magistrate on Tuesday.

“Our clients’ complaint alleges that the accused companies and individuals formed an illegal enterprise that involved luring innocent victims with false promises that they could safely acquire cryptocurrency through Bitcoin mining,” said Josh Snyder, a lawyer representing Dettmering and Mangubat. “As stated in the complaint, we believe that thousands of victims were defrauded by the defendants’ plan and suffered losses, and we intend to pursue this case vigorously to vindicate their rights.”

Founded in 2018, VBit promised investors that its powerful Bitcoin mining computers would reap monthly passive returns. The packages could cost up to $58,000, including computers the company leased and said it maintained at one of its remote hosting facilities.

But in Dettmering and Mangubat’s lawsuit, their lawyers say that promise was a “complete farce,” accusing VBit of generating its Bitcoin payouts from newly acquired client funds, not the mining computers themselves.

According to the filing, the men purchased $216,000 worth of mining and hosting packages combined. Such large investments were common, with other clients taking out thousands of dollars in loans to afford a package telling the Pittsburgh Post-Gazette they were now struggling to pay off their debt as their money remained frozen.

For more ambitious customers that VBit deemed “affiliates,” the company offered cash bonuses for signing up family and friends as new investors, the documents show. Washington state regulators, in order to allow VBit to redeem investors in that state, noted that many of these so-called affiliates had no experience with cryptocurrency.

Affiliates were promised not only the chance to earn more through faster Bitcoin mining speeds, but also a growing scale of bonuses that included $5,000 spending sprees, island vacations, a luxury sports car, and a pledge of a $1.5 million mansion to bring in $200 million in new investment.

“You will be encouraged to purchase an item that we like to call a conversation starter,” said a VBit salesperson while talking to affiliates in a YouTube recruitment video of the company, suggesting men use their spending spree to buy Brietling watches and Hermes belts and that women buy Christian Louboutin shoes and Chanel bags.

“It’s natural for people to ask, ‘What do you do for a living, what kind of job do you do?'” said the seller, suggesting that the eye-catching items would capture the attention of potential investors. “The moment they ask, this is your opportunity to expose them to your business and hopefully recruit them.”

Dettmering and Mangubat’s lawyers are now seeking unspecified damages and attorneys’ fees for their clients.

The filing also characterizes the sale to Chinese firm Advanced Mining Group as a “fictitious transaction”.

To date, no records of Advanced Mining Group are available in public databases, and the company’s CEO, Lillian Zhou, has not responded to repeated requests for comment.

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