Security service finds crypto mining farm in Vinnytsia allegedly stealing electricity Kiev substation

Editor’s note: The article has been updated to include the report of the Ukrainian energy regulator on the unjustified energy consumption of Vinnytsiaoblenergo.

Ukrainian security service reported on July 8, he revealed a crypto mining farm that allegedly stole electricity from a regional energy distributor in Vinnytsia, a town of nearly 400,000 people 270 kilometers southwest of Kiev.

According to the Security Service (SBU), thieves illegally mined cryptocurrency in a warehouse adjacent to the facilities of Vinnytsiaoblenergo, an energy distribution company. They used more than 5,000 computing devices, including Sony PlayStation 4 consoles and graphics cards crammed from floor to ceiling in metal racks.

Although crypto-mining farms are typically associated with computers, game consoles are cheaper and have powerful graphics cards that crypto specialists use to mine cryptocurrency, crack passwords, and process transactions. movies or pictures, said cryptocurrency expert Michael Chobanian.

According to the SBU, it is one of the largest illegal cryptocurrency mining farms discovered by Ukrainian law enforcement. However, “it’s a drop in the ocean” compared to other farms that potentially exist in Ukraine, Chobanian told the Kyiv Post. The more computers the farm uses, the higher its output, he said.

According to SBU estimates, crypto miners stole nearly $ 259,000 worth of electricity from Vinnytsiaoblenergo. The illegal activities may have led the city to experience power shortages, the SBU said.

To cover up the theft, crypto miners used electricity meters that did not reflect their actual energy consumption, the SBU said. Law enforcement is now trying to identify all suspects and verify whether company officials were involved.

In one declaration posted on July 9, Vinnytsiaoblenergo said it had nothing to do with any illegal activity by crypto miners: “The equipment used for mining cryptocurrency has never been used on premises owned by our business.”

Vinnytsiaoblenergo also said he found no evidence of electric theft and concluded that the SBU information “does not correspond to reality”.

“We will not make excuses. Let the SBU find out what happened, ”Vinnytsiaoblenergo’s press service told the Kyiv Post on July 12. The SBU did not respond to the request for comment at the time of publication.

Ukraine Energy Regulator (NERC) reported on July 12 that Vinnytsiaoblenergo artificially increased the volume of its electricity consumption to increase tariffs. In 2018 and 2019, for example, it consumed 35% more energy than in 2017. NERC also confirmed that due to the activity of the crypto-mining farm, Vinnytsiaoblenergo could have cost close to $ 259,000 – this number is proportional to the amount of unwarranted electricity consumption.

Vinnytsiaoblenergo is owned by Ukrainian businessman Konstantin Grigorishin and investment company ICU. Grigorichin shares some of his energy assets with Ukrainian oligarch Igor Kolomoysky. It’s worth $ 275 million, according to Forbes.

The crypto industry in Ukraine is paradoxical. Although it is not regulated and Ukrainians cannot register as crypto entrepreneurs or declare cryptocurrency exchanges, it is completely legal to mine and trade cryptocurrencies here. .

Experts said there are two ways of looking at crypto miners in Ukraine: as victims suffering from generally unfounded law enforcement raids or as criminals who illegally import technology for mining. of crypto and avoid taxation.

The SBU often abuses its power and seizes valuable equipment worth thousands of dollars without legal justification, said Nataliya Drik, CEO of Blockchain Ukraine organization. The country does not have a state registry of data centers used for crypto mining, so many specialists are working behind the scenes or moving abroad to avoid raids. “It also prevents the flow of foreign investment into the country,” Drik said.

There are also cryptocurrency miners and traders who view Ukraine as a haven for their business due to the lack of taxation and regulation.

To deal with both legal and illegal cryptocurrency entrepreneurs, Ukraine is working on laws to tame the industry. For example, lawmakers have already passed a law on virtual assets at first reading. It defines the legal status of virtual assets, ground rules and requirements for service providers with virtual assets. The Ministry of Digital Transformation is also planning to make changes to the tax code and set the income tax rate at 5% for crypto companies.

Ukraine also plans to build cryptocurrency mining data centers alongside nuclear power plants. Experts said these data centers could help the country solve the problem of inefficient energy spending and bring money to the state budget.

The government plans to complete the project by 2023 but this could take longer: “All these efforts could be in vain because of corruption,” according to Chobanian.

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