It appears that one of the largest “crypto mining farms” that Ukraine’s Security Service claims to have ever exposed wasn’t mining cryptocurrency at all.
On July 8, the Security Service (SBU) seized over 5,000 Sony PlayStation consoles and graphics cards in a warehouse adjacent to the facilities of Vinnytsiaoblenergo, an energy distributor in Vinnytsia, a city of almost 400,000 people 270 kilometers southwest of Kyiv.
The SBU claims that crypto miners had stolen nearly $259,000 worth of electricity from Vinnytsiaoblenergo and that their activity could have led to power shortages in the city.
But on July 15, Ukrainian lawyer Maksym Bojko wrote on Facebook that the accusations are groundless and that the confiscated equipment actually belongs to tech company ММІ Engineering, registered in the UAE.
Bojko, who represents ММІ Engineering, told the Kyiv Post that the company used gaming consoles and graphics cards to train artificial intelligence for computer games and program neural networks — not to mine cryptocurrency.
ММІ Engineering cannot resume its work since its $1 million worth of equipment is confiscated, Bojko told the Kyiv Post. The firm also risks losing its foreign investors who fear further raids.
It is unclear why the SBU decided to raid the facility. The security service could not be reached for comment.
The Ukrainian crypto industry is struggling to attract investors because raids like this happen all the time: law enforcement seizes valuable equipment even if it is used legally and provides no reasons for its confiscation, according to Nataliya Drik, CEO of organization Blockchain Ukraine.
Given the lack of regulation, many cryptocurrency specialists work in the shadows or move abroad to avoid the scrutiny of law enforcement.
In this case, the SBU claimed that the presumed crypto miners were stealing electricity and using electricity meters that did not reflect their actual energy consumption. They then searched the former facilities of Vinnytsiaoblenergo on July 7 and 8 suspecting that the energy distributor along with another energy company, Alfa Energy, were involved in illegal cryptocurrency mining.
During the raid, law enforcement unwittingly seized equipment belonging to MMI Engineering, who rented the warehouse space from Alfa Energy. MMI Engineering wasn’t even a part of SBU’s investigation, Bojko said.
A few days later on July 12, Ukraine’s energy regulator (NERC) reported that Vinnytsiaoblenergo had artificially ramped up the volume of electricity consumption to increase tariffs. NERC says that Vinnytsiaoblenergo had consumed 35% more energy in 2018 and 2019 than it did in 2017.
NERC claims that the $259,000 the SBU is claiming crypto miners stole is proportionate with the amount of unjustified electricity consumption.
Vinnytsiaoblenergo denies the allegations. It says that after its audit it has found no evidence of higher electricity consumption. According to a statement published on its website on July 15, MMI Engineering started its operations in July 2020, a year after NERC claimed Vinnytsiaoblenergo artificially increased energy consumption.
According to the statement, “the SBU has presented unverified and unconfirmed conclusions that were then shared by Ukraine’s and foreign media.”
But Bojko said that ММІ Engineering, paid for the electricity. The company even shared screenshots of electricity bills with Ukrainian media showing that ММІ Engineering had an official deal with Vinnytsiaoblenergo as well as Enera Vinnytsia, an energy supplier.
According to the documents, ММІ Engineering paid over $11,000 for electricity last month. “There are no debts to the electricity supplier,” Bojko said.
Bojko said that he also doesn’t understand why the SBU shared “fake information” about the activity of ММІ Engineering.
After the SBU’s raid, the warehouse that the company rented looks deserted: SBU seized computer equipment stacked on metal racks, leaving only empty PlayStation boxes scattered all over the place.
ММІ Engineering has filed complaints with the Office of the Prosecutor General and the Pechersk District Court in Kyiv.
According to Bojko, the confiscated equipment of ММІ Engineering is stored by a private company that, according to state registers, trades fish, crustaceans, mollusks. “We don’t know in which conditions the equipment is stored and we are very concerned about it,” Bojko said.
