Illegal Crypto Mining Operations Continue to Escape Mainstream Regulation


Mining has always been an integral aspect of major cryptocurrencies. Even in the beginning days of Bitcoin, mining was a way that investors who didn’t have significant fiat capital might be able to capitalize on the massive market share allotted to miners who helped verify transactions. Without the work of mining operations all over the country, there would be no way to verify that the transactions recorded on the blockchains of major cryptocurrencies are legitimate. Consequently, mining is a prerequisite to trust in the cryptocurrencies that drive the market.

But when mining became more mainstream, creators of mining technology became the leaders of an entirely new and largely profitable industry. Millions of new market participants joined in on the mining game, inspiring a new generation of young creators and developers to come out with their own version of popular mining rigs in order to maximize their own profit and the profits of their customers. But for every three companies that came forward with new, legal mining equipment, there was at least one clandestine operation releasing dangerous and illegal mining platforms.

South Korea in particular is a hot-spot for illegal mining operations. Police in the capitol of South Korea announced just days ago that they apprehended a group of five suspects who are theorized to have been part of a major mining operation in a group of large buildings disguised as everything from semi-conductor manufacturers to chicken farms. They defrauded the government by posing as entities that are entitled to massive amounts of free electricity and were then able to generate significant amounts of Bitcoin and Ethereum though the illegal operation with little up-front costs.

The Illegal Mining Market

The biggest draw to mining illegally is clearly the lack of prices associated with the process. Electricity and computing power are two of the biggest considerations in legitimate mining operations, with the average miner having to dole out significant portions of their profits to electricity and cloud computing companies to simply stay valid and operational.

Miners in the illegal sector also make use of ASIC mining rigs, which are high-powered and high-technology miners banned on most major blockchains, including Ethereum. These systems are typically relatively expensive, but offer the most effective mining on the market, by far.

Profit in the Illegal Sector

These are not small operations, either. According to authorities involved in the South Korean bust, the miners were able to produce over USD $500,000 in Bitcoin alone, along with a few undisclosed amounts of Ethereum and additional Bitcoin that remains undiscovered or unreported. While the group had used some money to secure additional electricity and pay rent on the buildings which they occupied, much of the money was to be split among the co-conspirators.

This is a global problem as well. New York officers discovered a cryptocurrency mining setup after reports surfaced regarding the excessive use of local electricity by the miners. Though no one was arrested in this incident, the investigation of the cryptocurrency mining plant was thorough and likely suggests that authorities understand the threat that illegal mining operations pose to resource allocation.

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