Embroiled South Philadelphia cryptocurrency company facing crackdown from Montana financial regulators

VBit Technologies, the South Philadelphia-based cryptocurrency mining company accused in mounting lawsuits of running a Ponzi scheme, is facing a crackdown from regulators in Montana, where it operated a data center.

The company, which was headquartered on Washington Avenue until it shuttered its doors last year, was accused of defrauding thousands of investors who were unable to access over $11 million worth of Bitcoin stored across their digital accounts.

VBit’s executives, who claimed the company was sold to a Chinese firm despite no public record of the sale, face six lawsuits in Pennsylvania and Delaware federal courts alleging securities fraud and other offenses.

Though many of the company’s 15,000-plus customers were located in the Philadelphia region, VBit’s warehouse in Columbia Falls, Mont., housed the expensive, energy-consuming mining computers they were leasing.

Customers were told the devices, which process Bitcoin transactions, would generate a flow of new Bitcoin that was regularly deposited into digital accounts until around the time of cryptocurrency’s global crash in value in May.

A consumer complaint got the attention of Montana State Auditor Troy Downing, whose office is demanding the embattled company register to sell securities in the state and identify itself as a multilevel marketer within 15 days.

Should VBit not comply with the administrative order, Downing’s office said the company would be considered guilty by default and ordered to pay a $15,000 fine and restitution to its investors in the state.

“A lot of folks just don’t understand what they’re investing in,” Downing said Friday. The regulator said his office knew at least two victims in the state, a married couple who invested $24,000, though he anticipates more will come forward.

Lawyers for VBit did not immediately respond to a request for comment Friday.

Montana has become a destination for cryptocurrency mining in recent years, so much so that one county passed an environmental law regulating companies participating in the energy-consuming process.

An investigation by the Daily Inter Lake, an outlet based in Kalispell, Mont., found that VBit purchased the Columbia Falls property in 2021, and that the facility used large amounts of energy — enough to power the equivalent of 3,800 homes in the area.

The Inter Lake report also uncovered a video of the company’s elusive Philadelphia-based CEO, Don Vo, making a speech in a nearby restaurant. Later, Vo invited the company’s “affiliates” — topline salespeople tasked with recruiting new customers — to the Columbia Falls facility.

VBit still can respond to the regulator’s note and request a hearing, according to Downing. He noted that while multilevel marketing companies aren’t illegal in Montana, they must undergo a registration process for regulators to determine whether the business functions like a pyramid scheme.

Otherwise, VBit could face a similar fate of BlockFi, another cryptocurrency company that Downing said was ordered to pay Montana $900,000 last year for selling unlicensed securities.

Downing said his office warns crypto buyers to be wary of investment opportunities that promise large returns, and to remember the extreme volatility of Bitcoin, which peaked at over $65,000 per coin in 2021 but was worth around $20,000 when it crashed.

“We’re trying to do what we can to educate Montanans and go after the bad guys,” Downing said, ”so that we can use that as lessons learned in what to watch out for.”