Cloud mining means paying a company for a share of its mining hash power and receiving a proportional cut of the coins that hash power earns, minus the company's fees. You never touch the hardware. That also means you cannot check whether the hardware exists, and this is the main risk. On 20 July 2026 the US Securities and Exchange Commission (SEC) filed charges against an operator called Mining Automatic. The SEC alleges it raised about $22 million while sending only about 13% of investor money to mining. At current network figures, 10 TH/s of Bitcoin hash power earns roughly 0.0000042 BTC a day before any fees. Check that number before you look at any provider's marketing.
The newest case: Mining Automatic (July 2026)
On 20 July 2026 the SEC filed partially settled charges against Zan Shaikh, a Florida resident, and Bright Vision Distribution LLC, which does business as Mining Automatic. The case is SEC v. Zan Shaikh and Bright Vision Distribution LLC, No. 1:26-cv-13301, in the US District Court for the District of Massachusetts. The SEC's complaint alleges the following:
- From about June 2023 to May 2025, the defendants raised about $22 million from more than 380 investors.
- They promised guaranteed monthly returns from a crypto mining operation that could not generate them.
- Only about 13% of investor funds went to expenses for the purported mining. The rest went largely to marketing for new investors and to Shaikh's personal and unrelated business expenses.
- They took in at least $20 million more than they repaid.
- They misrepresented their mining experience, how the money was used, the state of the operation and why monthly payments were missed.
The charges cite Sections 5(a), 5(c) and 17(a) of the Securities Act, and Section 10(b) and Rule 10b-5 of the Exchange Act. The defendants consented to final judgments, which still need court approval. These include permanent injunctions and, for Shaikh, an officer-and-director bar. The court will set disgorgement, interest and penalties later. These are allegations in a complaint, not findings.
How cloud mining works
- You buy a contract. It specifies an amount of hash rate, for example 10 TH/s on Bitcoin's SHA-256, and a duration.
- The provider points that hash rate at a mining pool. Proof-of-work mining is a race to find a valid block hash. More hash rate means a larger share of the blocks found.
- Rewards flow back pro rata. Each Bitcoin block pays the miner a block reward: the block subsidy plus the transaction fees in that block. The reward is collected by the block's first transaction, called the generation transaction.
- The provider deducts fees and credits you. You withdraw once you pass a minimum payout threshold.
Contracts come in two basic forms:
- Hash power rental. You buy a quantity of hash rate with no link to specific machines.
- Hosted or leased hardware. Identifiable machines in a facility are assigned to you.
With hash power rental, the number on your dashboard is only the provider's word. Hardware you can identify, and ideally inspect, gives you at least something to check.
The protocol rules that set your earnings
- Difficulty adjusts every 2,016 blocks. Bitcoin's target for that span is 1,209,600 seconds, or two weeks. When more hash rate joins the network, difficulty rises and each terahash earns less. A contract's output in coins falls as the network grows, whatever the provider does.
- The subsidy halves every 210,000 blocks. It started at 50 BTC, and Bitcoin Core cuts it in half on that interval. The fourth halving came at block 840,000, mined on 20 April 2024 (UTC), and set the subsidy at 3.125 BTC. That remains the subsidy until block 1,050,000.
- Fees are a small share right now. Over the 144 blocks up to height 973,073, total rewards were about 451.73 BTC. Of that, fees were about 1.73 BTC, under 0.4%. The subsidy is almost all of a miner's income.
What 10 TH/s actually earns today
You can do this calculation yourself, with no provider estimate involved:
Your daily coins ≈ (your hash rate ÷ network hash rate) × total block rewards per day
Inputs read on 25 October 2026:
| Input | Value | Source |
|---|---|---|
| Network hash rate (3-day average) | about 1,068 EH/s (1.068 × 10²¹ H/s) | mempool.space |
| Network difficulty | about 140.58 trillion | mempool.space |
| Rewards in the last 144 blocks (about one day) | about 451.73 BTC | mempool.space |
For 10 TH/s:
- Share of network: 10 × 10¹² ÷ 1.068 × 10²¹ ≈ 0.00000000936
- Daily gross: 451.73 × 0.00000000936 ≈ 0.0000042 BTC
- 365 days at constant difficulty: ≈ 0.00154 BTC gross
Then subtract the provider's fees. If a contract takes 25% of gross revenue (a hypothetical figure), daily net falls to about 0.0000032 BTC. To get a break-even point, convert the daily net into your currency at the current price and divide the contract price by it. Rerun the calculation with difficulty 10–20% higher, because a rising network hash rate shrinks your share. The quote that clears break-even with the least room to spare is usually the one to walk away from.
Your result in coins does not depend on the coin's price. Your result in dollars does. A contract can deliver every satoshi it promised and still lose money if the price falls.
Cloud mining vs. mining yourself vs. a pool
| Cloud contract | Own hardware in a pool | Solo mining | |
|---|---|---|---|
| Upfront cost | Contract price | Hardware, setup, power | Hardware, setup, power |
| Electricity | Built into fees | You pay | You pay |
| Who verifies output | The provider | Pool payouts and your own machines | The blockchain directly |
| Counterparty risk | High | Pool operator only | None |
| Exit | Bound by contract terms | Sell the hardware | Sell the hardware |
The honest argument for cloud mining is access to cheap industrial power and no hardware to manage. The argument against it is that you are trusting a third party to report output you cannot see.
What would your hash rate earn per day?
Enter your contract's hash rate, the provider's fee and a possible rise in network hash rate to see your estimated daily coins, worked out yourself with the article's formula.
| Your contract's hash rate | Network hash rate (3-day average) | Block rewards in the last 144 blocks (about one day) | Provider's fee on gross revenue | Rise in network hash rate | Estimated daily coins after fees |
|---|---|---|---|---|---|
| 10 TH/s | 1,068 EH/s | 451.73 BTC | 25 % | 0 % | 0.0000032 BTC |
| 10 TH/s | 1,068 EH/s | 451.73 BTC | 0 % | 0 % | 0.0000042 BTC |
| 10 TH/s | 1,068 EH/s | 451.73 BTC | 25 % | 20 % | 0.0000026 BTC |
- Network hash rate and daily rewards are a snapshot from 25 October 2026 and change every block; fee and hash-rate rise are your own inputs.
- The result is in coins and assumes the provider really points the hash rate it sells at a pool and pays out in full.
This estimates coins only: it does not convert to dollars or compute break-even, ignores withdrawal fees, payout thresholds, the next halving and tax, and cannot show whether a provider's hash rate exists.
Merged mining: a real feature to ask about
Dogecoin has been merge-mined with Litecoin since September 2014. The method is auxiliary proof of work (AuxPoW): the same Scrypt work secures both chains, so miners do not have to split their hash power between the two networks. If a provider sells Litecoin hash power, ask whether the Dogecoin rewards are passed to you or kept.
How cloud mining frauds work, from the court record
The pattern repeats across prosecuted cases. A professional-looking dashboard shows earnings. Early payouts are funded by new deposits. Referral rewards drive growth. Withdrawals fail once new money slows.
| Case | Period | Amount | What the authorities say |
|---|---|---|---|
| HashFlare (US DOJ, W.D. Washington) | 2015–2019 | Sales over $577 million | It lacked the computing capacity for most of the mining it claimed, and its dashboard showed falsified data. Co-founders Sergei Potapenko and Ivan Turõgin pleaded guilty to conspiracy to commit wire fraud in February 2025 and agreed to forfeit assets worth over $400 million for a victim remission process. |
| BitClub Network (US DOJ, D. New Jersey) | April 2014–December 2019 | At least $722 million | It sold shares in purported mining pools, paid for recruiting and showed investors false "bitcoin mining earnings". Indicted 5 December 2019; several defendants pleaded guilty. |
| Innovamine (SEC, E.D. New York) | April–July 2019 | Part of at least $7 million across two schemes | It promised a daily "automatic payout" from cloud mining. The SEC alleges the promises were untrue and nearly all funds were misappropriated. |
| Mining Automatic (SEC, D. Massachusetts) | June 2023–May 2025 | About $22 million | Guaranteed monthly returns; about 13% of funds spent on mining (alleged). |
In August 2025 a federal judge in Seattle sentenced the HashFlare founders to time served, roughly 16 months already spent in custody, plus a $25,000 fine each. Prosecutors had sought 10 years. These sentencing details come from news reports of the hearing, not from a court document we read.
For scale: the FBI's 2025 IC3 annual report puts reported US losses to cryptocurrency investment fraud at over $7.2 billion in 2025, up 24% on the year before. That figure covers all crypto investment fraud, not only cloud mining.
Red flags that match these cases
- Guaranteed or fixed daily/monthly returns. Output depends on difficulty and price, which nobody controls. Mining Automatic's alleged promise was exactly this.
- No named pool and no way to check output. HashFlare's dashboard figures were falsified. If you cannot match reported hash rate against a pool's public statistics or identifiable machines, you have no evidence.
- Rewards for recruiting. BitClub paid investors to bring in investors.
- Pressure to upgrade or roll over. About $7 million of Mining Automatic's raise allegedly came from investors rolling over money from an earlier failed venture.
- Missed payouts explained away, or new fees to "release" funds.
- "Lifetime" contracts for a one-off fee. Hardware wears out, power costs never stop and difficulty tends to rise, so a perpetual payout for a fixed price does not add up.
- Anonymous operators, or no registered company you can look up.
Checks before you pay
- Name the pool, and match your hash rate against its public statistics.
- Get the full fee schedule in writing: maintenance, pool, withdrawal fees and the payout threshold.
- Run the earnings formula above with live network data and a higher-difficulty case.
- Prefer short contracts, so you can compare real output with what was promised before committing more.
- Withdraw to a wallet whose keys you hold, and don't let balances build up on the platform.
- Look up the company's registration, and search regulator and court records for its name and its founders' names.
- If you have been defrauded in the US, the FBI's IC3 (ic3.gov) takes reports. Include wallet addresses, transaction hashes and copies of your communications.
Is cloud mining worth it?
Not guaranteed, and often not. In coins, a contract earns your share of the network minus fees. That share shrinks as difficulty rises, and the subsidy will halve again at block 1,050,000. Whether the coins cover the contract price depends on fees and on the coin's price, and you carry all the counterparty risk. If a provider cannot show you where its hash rate is pointed, the rest of its pitch does not matter.
Limitations: network figures are a snapshot from 25 October 2026 and change every block. The SEC's Mining Automatic claims are unproven allegations.
