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Cryptocurrency Mining Firm Founder Swindles $35 Million of Investor Funds after Citing Low Profitability and Rising Expenses

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Cryptocurrency Mining Firm Founder Swindles $35 Million of Investor Funds after Citing Low Profitability and Rising Expenses

The founder of a Vietnamese cryptocurrency firm has allegedly fled after swindling investors to the tune of millions, as reported by VNExpress on July 29, 2018.

Millions Stolen

Investors and board members of the Ho Chi Minh City-based mining company, Sky Mining, are claiming to be victims of a fraud case after the company’s founder, Le Minh Tam, went missing in the third week of July 2018.

Tam posted an apology on his personal Facebook account for defrauding investors and his board members, citing the disappearance was necessary to “protect his life.” Tam stated that the rising cost of cryptocurrency miners, along with the low profitability of the sector, added up to his decision. He concluded his post by asking investors to visit company offices for recovering their money. However, the company’s offices and nameplates were found closed and removed when investors attempted to track Tam.

Tam is said to have stolen over $35 million from investors, each of whom purchased the company’s cloud mining services to incur gains on their initial investment.

Tam Flees to U.S.

Investigations revealed 600 unused mining machines in a Sky Mining warehouse in Dong Nai province near Ho Chi Minh City, along with several people guarding the venue claiming to be maintenance workers.

Sky Mining’s board of directors provided no respite to investors, instead claiming their innocence on the matter and considering themselves “victims too.” However, Deputy Chairman Le Minh Hieu has reportedly formed a 16-member body to calculate the company’s assets, presumably to partly disburse investors. He added that the city’s police authorities have been notified of the nefarious act and supplied evidence to prove their innocence.

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Hieu believes Tam has fled to the U.S. after emptying the company’s bank accounts and investor deposits. In a rather unusual move, Hieu added that Tam was the only board member directly handling daily operations of storing the mining rigs. Meanwhile, 20 estranged investors have filed a petition to contest against the fraud with local police authorities near the Sky Mining warehouse.

Extravagant Attractions

The company was known for its extravagant parties and won investor trust by hosting elaborate conferences, meetups, and other promotions.

A Sky Mining promotional event with investors.

(Source: VNExpress)

The indigenous operation worked similarly to cloud-based, “crowdsourced” mining businesses. Investors could purchase mining rigs from $100 to $5,000, and use them at one of Sky Mining’s 26 operation centers.

False Promises

The company reportedly promised 300 percent profits within 12 months if investors took up their lucrative packages. Interestingly, the mining rigs were to be returned to Sky Mining at the end of this period, indicating investors were merely renting the miners.

Investors were offered bounties and commissions for attracting more people to the deal, in a move reminiscent of a true Ponzi scheme. Using this strategy, the company is said to have acquired over 7,000 mining rigs.

Much was said against Vietnam’s cryptocurrency ban in July 2018, with the community voicing government censorship as a major hurdle preventing digital assets from reaching their pinnacle. However, the rise of criminal cases involving cryptocurrencies adds to the authorities’ disdain of the volatile asset class.

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