In the suits against VBit Technologies, investors say they were victims in a “massive Ponzi scheme.”
VBit Technologies, the South Philadelphia-based cryptocurrency mining company accused of scamming Bitcoin newcomers out of hefty investments, has been hit with three new civil complaints by investors alleging they were taken in by a “massive Ponzi scheme.”
The federal filings in Pennsylvania and Delaware allege VBit used an intricate, pyramidlike marketing scheme to gain vulnerable new customers. In exchange for its recruitment efforts, the firm promised untrained investors spending accounts for luxury clothing, watches, and exotic vacations.
The filings also charge that company executives lied to customers about their products, with one suit suggesting they engaged in racketeering activities.
The developments come amid high-profile meltdowns in the cryptocurrency world, including the November collapse of the crypto exchange FTX, which saw that company, led by billionaire Sam Bankman-Fried, file for bankruptcy after facing an $8 billion shortfall.
While local fallout from the FTX fiasco has been minimal, VBit aggressively courted investors throughout the Philadelphia region during the burgeoning days of Bitcoin’s rise and before it fell to below 50% of its value.
Headquartered in an unassuming brick building along Washington Avenue, VBit Technologies says it was sold to the Chinese company Advanced Mining Group — a firm with no public filings — earlier this year for $105 million. By June, when customers began to notice that the bitcoin in accounts VBit controlled was inaccessible, one former executive estimated the company had 15,000 investors worldwide.
The firm’s 34-year-old founder, Don Vo, vanished from public view shortly after the reported sale. Before 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 in Philadelphia’s priciest restaurants.
Lawyers representing VBit Technologies and its executives denied wrongdoing in a response to a complaint filed in September. The company’s lawyers did not respond to recent requests for comment on the new complaints. In emails sent to its customers this fall, the company claimed it would begin issuing refunds. No criminal charges have been filed.
A class-action lawsuit filed in November in Delaware alleges that VBit “functioned as a massive Ponzi scheme that paid out the promised bitcoins only as long as new victims provided additional funds to do so.”
That suit was brought by two Philadelphia men, Ross Dettmering and Francis Mangubat, and is one of three filed in Delaware’s sole federal court this fall. In Philadelphia, plaintiff Michael Enno alleged fraud in a complaint filed in Pennsylvania’s Eastern District Court in October.
No trial dates have been set, however a suit filed in September was assigned a magistrate judge on Tuesday.
“Our clients’ complaint alleges the defendant 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, an attorney representing Dettmering and Mangubat. “As alleged in the complaint, we believe thousands of victims have been defrauded by the defendants’ scheme and sustained losses, and we intend to vigorously litigate this case to vindicate their rights.”
Founded in 2018, VBit promised investors that its high-powered bitcoin mining computers would reap them passive monthly returns. Packages could cost up to $58,000, including computers that the company leased and claimed it maintained at one of its remote hosting facilities.
But in Dettmering and Mangubat’s suit, their lawyers allege this promise was a “complete sham,” accusing VBit of generating its bitcoin payouts from the funds of newly acquired customers — not the mining computers themselves.
According to the filing, the men purchased mining packages and hosting services worth a combined $216,000. Such large investments were common, with other customers who took out thousands of dollars in loans to afford a package telling the Pittsburgh Post-Gazette they were now struggling to pay back their debt as their money remains frozen.
For more ambitious customers whom VBit deemed “affiliates,” the company offered cash bonuses to sign up family and friends as new investors, filings show. Washington state regulators, in an order for VBit to pay back investors in that state, noted many of these so-called affiliates lacked any experience with cryptocurrency.
Affiliates were promised not only a chance to make more money through faster bitcoin mining speeds but also an escalating scale of bonuses that included $5,000 shopping sprees, island vacations, a luxury sports car, and a pledge of a mansion valued at $1.5 million for bringing in $200 million in new investments.
“You will be encouraged to purchase an item that we like to call a conversation starter,” said a VBit salesperson while speaking to investors in a recruitment video on YouTube, suggesting that men use their spending spree to purchase Brietling watches and Hermes belts and that women purchase Christian Louboutin shoes and Chanel purses.
“It’s only natural that they’re gonna ask you, ‘What do you do for a living, what kind of work do you do?’” the salesperson said, suggesting the flashy items would capture the attention of potential investors. “The minute they ask that, that’s your opportunity to expose them to your business and hopefully recruit them.”
Lawyers for Dettmering and Mangubat are now seeking unspecified damages as well as legal costs for their clients.
The filing also characterizes the sale to the Chinese company Advanced Mining Group as a “sham transaction.”
To date, no records of Advanced Mining Group are available in public databases, and the company’s chief executive, Lillian Zhou, has not responded to repeated requests for comment.
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