For example, in the beginning of the complaint it certainly paints a picture that the company in question had little or no mining capacity.
The complaint uses prejudicial adverbs and adjectives to persuade the reader such as:
that defendants purportedly devoted to virtual currency mining. In reality, defendants sold far more Hashlets worth of computing power than they actually had in their computing centers. There was no computer equipment to back up the vast majority of Hashlets that defendants sold.
I certainly read and other claims at the beginning of the claims, especially in regard to the ponzi accusation, and come to the conclusion that the charges are the company was just outright selling mining contracts for non-existent hardware "mining power" and in turn using those sales from new customers to pay off the "fake mining reward"
The sensationalist continues:
As a result of dramatically overselling their computing capacity,
However, digging into the details that's not the case. The company did have mining power. And it's first week of sales (in August) 3-4 times more bitcoin hashing power was sold than the company actually owned:
48. During their first week of availability alone, GAW Miners and ZenMiner oversold -- between triple and quadruple -- the number of Hashlets for which they had the supporting computing power. Yet, their sales continued. 49.
Note Alt coins were not mentioned above and if there were fraudulent Alt coin mining sales it sure would be mentioned.
So 3-4x oversale? That's not dramatic... no problem. Order my asic miners and voila... the contract paid for the hardware (or will pay).
For example, If Microsoft or Amazon suddenly sold 3-4x more hard drive space for cloud storage than they physically owned would that be fraud? Certainly not if the increased storage capacity to meet the storage needs in there data centers...
Continuing...
49. By October 2014, GAW Miners had oversold Hashlets to an even more extreme degree. It had oversold altcoin-mining Hashlets by at least about 100 times its computing capacity, and bitcoin-mining Hashlets by at least about 5 times its computing capacity.
50. Though GAW Miners built a data center that, by November 2014, contained significant computing capacity for mining bitcoin, it made no increases to its computing capacity for mining altcoin.
Well 3 points here. First, they certainly had capacity since the start and they continued to expand it to the point that the company actually set up a data center to increase mining capacity. Second, given the sensationalized language throughout this complaint, I read 50) as regarding the data center containing "significant capacity for mining bitcoin" in November as the company bitcoin mining capacity is no longer "dramatically oversold" at 3-4x capacity. Instead the company can now deliver that and more.
The complaint doesn't mention this convenient little fact and instead uses a literary technique in the previous paragraph called foreshadowing in an attempt to (mis)lead the reader down the narrative of ongoing and perpetuate fraud but turning focus on alt coins now that bitcoin capacity has been take care of.
I am not familiar with the company nor the crypto currency scene that long ago so I can be entirely wrong. However, my intuition tells me that during this time frame there was probably a drop in Bitcoin Price coupled with a spike in one or more alt coin price causing the influx of orders to be diverted from bitcoin to AltCoin.
Certainly bad news for the company after just opening a data center for mining bitcoin. Fraudelent
I'll continue reading the complaint and given the comments on this thread I am most LIKELY ENTIRELY WRONG, but something just doesn't add up. So far I take it this as an ambitious entrepreneur getting caught by the market and going belly up.
If there was deliberate fraud and scam I hope the SEC makes a better case for its complaint in the last 8 pages besides contracts were being sold at slightly higher capacity, which can easily be remedied in hours or argued against that it was never expected for all of those contracts to be utilized at the same time... (much like ISPs and cell providers over sell capacity for internet and data bandwidth and offer "bursting").