Digital Securities + Professional Custody

The Dual Lock That Makes PMN Safer for Bitcoin Exposure

Starting with a real cautionary tale: the pitfalls of cloud mining

For many retail investors, their first attempt to get exposure to Bitcoin’s upside isn’t always by simply buying BTC outright. Often, they’re drawn to what appears to be a low-risk alternative: cloud mining contracts. On paper, these seem to offer all the benefits of Bitcoin mining without the hassles of hardware, electricity bills, or technical oversight.

But real-world outcomes tell a different story.

Between 2018 and 2022, tens of thousands of ordinary investors around the world poured money into cloud mining platforms like HashFlare, which at its height marketed itself as one of the largest cloud mining operators globally. Users paid hundreds or thousands of dollars for multi-year contracts, expecting steady Bitcoin payouts each month.

By July 2022, HashFlare abruptly announced it was ceasing operations, claiming that mining had become unprofitable due to electricity costs. Withdrawals were frozen. Later investigations by Estonian authorities revealed that HashFlare likely never operated the industrial-scale mining farms it advertised. In 2022, its founders were formally charged with fraud and money laundering tied to a scheme that prosecutors said bilked investors out of over $575 million.

It wasn’t the only example. Across Asia and Eastern Europe, dozens of smaller cloud mining websites went dark during the last crypto downturn, often taking millions in investor deposits with them. These were ordinary people, attracted by professional-looking dashboards and promises of “guaranteed daily returns.” In reality, many didn’t even have basic contracts or enforceable rights, leaving them entirely exposed when platforms vanished overnight.

How PMN takes a fundamentally different approach with regulated digital securities

PMN was structured precisely to avoid these pitfalls — by building protections into both the legal foundation and the physical custody of mined Bitcoin.

The first layer of security comes through the regulated digital security structure. Unlike cloud mining operations that rely on vague website dashboards and hope that operators remain honest, PMN operates under well-established U.S. securities exemptions. For U.S. accredited investors, it’s offered under Regulation D, while non-U.S. investors participate under Regulation S.

Everything is spelled out in a formal Private Placement Memorandum (PPM). This means investors aren’t left trusting marketing promises; they have a legally enforceable document that clearly details:

• How funds are deployed into hash rate contracts and mining operations.

• Exactly how net proceeds are calculated (after mining pool fees, custody, audit, legal and tax costs — importantly, electricity and hosting are accounted separately).

• The lock-up periods, transfer restrictions, and investors’ rights in the event of disputes.

Beyond the paperwork, PMN also uses Ethereum smart contracts to record ownership on-chain. This provides a cryptographic, publicly auditable layer of evidence, complementing the formal legal agreements.

Why professional custody forms the second critical safeguard

One of the most underappreciated vulnerabilities in typical mining or cloud arrangements is where the Bitcoin actually ends up.

HashFlare and similar schemes had mining payouts controlled by the same operators who marketed and managed the investment. Investors had no insight into custody practices, no assurance that mined coins wouldn’t be diverted, and often no segregation from the company’s general funds.

PMN’s architecture eliminates that risk by employing regulated, institutional-grade custody. Bitcoin mined through PMN’s underlying contracts is not sent to project operators’ wallets. Instead, it goes directly into multi-signature wallets held by custodians like BitGo or Coinbase Prime, who:

• Maintain strict segregation of client assets,

• Use hardware security modules (HSMs), multi-sig protocols, and cold storage practices,

• And carry insurance specifically designed for digital asset losses.

These custodians are subject to external audits and regulatory scrutiny, creating a secure bridge between the mining process and investors’ future distributions.

Why sophisticated capital demands this structure

This dual security approach isn’t novel in the institutional world — it’s the norm.

Family offices, hedge funds, and endowments that allocate to Bitcoin virtually never buy coins and park them on retail exchanges, nor do they rely on a vendor’s “promise to mine.” They secure positions through regulated investment structures and professional custodians precisely to mitigate risks of operational failures, theft, or fraud.

PMN effectively packages these same institutional protections into a form accessible to individual investors, combining:

1. Regulated digital securities that spell out and enforce investors’ rights under established law, and

2. Independent, insured custody that ensures mined Bitcoin is held safely, outside the reach of project operators.

More than buying Bitcoin or signing up for a flashy website

The HashFlare collapse and similar stories show what happens when investors rely on websites instead of enforceable contracts and regulated infrastructure. With PMN, your rights are defined under U.S. securities law, and your future Bitcoin is secured in trusted vaults, not hidden company wallets.

It’s still Bitcoin — but owned and protected through structures designed to withstand volatility, operational missteps, and the temptation for small operators to take shortcuts with customer funds.

For investors who want to integrate Bitcoin exposure into a broader portfolio without exposing themselves to the all-too-common risks of the retail crypto world, this dual-layer model of regulated securities plus professional custody represents a dramatically safer alternative.