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Gate.io Blog Authorities Close Down Over 1500 Illegal Crypto Mining Rigs In Dagestan

Authorities Close Down Over 1500 Illegal Crypto Mining Rigs In Dagestan

24 June 15:44

[TL; DR]

Cryptocurrency mining is cost and energy-intensive.

Due to the high cost of running a mining facility, operators are setting up illegal mining facilities in some regions of Russia.

One of the hotspot areas for illegal crypto mining activity in Russia is Dagestan.

The Dagestan region, alongside Krasnoyarsk Krai and Irkutsk Oblast, has continued to suffer electricity breakdown and blackouts due to this heavy power consumption.

The recent clampdown by officers of the Federal Security Service and Ministry of Internal Affairs in Dagestan led to the discovery of two illegal crypto mining farms.

About 1467 mining equipment was uncovered in this illegal facility in Dagestan.

Asides from running illegal facilities, operators of these facilities also install mining rigs, connect these rigs to the (Government) power grid and provide security to other illicit miners.

The seized mining equipment will be evaluated, and the individuals will be charged in court based on the criminal code of the Russian Federation.

Similar operations by the law enforcement agencies have uncovered 95 illegal mining rigs in Makhachkala Vodokanal, another Russian province.

Keywords: mining, facility, illegal, Russia, Uncover, Government, crypto.

[Full Article]

Cryptocurrency mining is a cumbersome task, and it is energy (electricity) intensive and time-consuming. Setting up a crypto mining facility requires a lot of capital and expertise.

For a country like Russia, with some of its regions having many miners, these miners know the huge benefit of mining activities. Still, they do not want to bear the cost of setting up a legal mining facility.

This is why more illegal mining facilities and operators in those regions are not easily accessible to the Law Enforcement Agents.

In this article, we shall identify the regions in Russia that are prone to illegal crypto mining activities and some of the steps taken by the Government and its agencies to ensure the illegal activities are reduced to the barest minimum.

Clampdown Of Illegal Mining Facilities In Dagestan

Image: YouTube

In recent times, there has been a heavy spotlight on Dagestan by the Russian Law Enforcement Agency. The Republic of Dagestan has become a hotspot for illegal crypto mining activities.

Dagestan and other Russian regions such as Krasnoyarsk Krai and Irkutsk Oblast have also become the home to these illegal crypto miners and their illegal mining activities. These regions have become the choice destination for these illegal activities due to the low electricity rates being maintained in these regions.

However, as more illegal miners keep trooping to Dagestan, the region continues to suffer electricity breakdown and blackouts. The electrical consumption of crypto mining activities outweighs the electrical networks available in the area.

These issues necessitated the need for the Law Enforcement Agency to swing into action and clamp down on these illegal crypto miners.

In a recent clampdown, the Officers from the Federal Security Service and the Ministry of Internal Affairs of Dagestan discovered two illegal crypto mining farms containing about 1,500 mining machines. Corroborating the details of the operation, Tass News Agency reported that “The Law Enforcement Agents have recovered a total of 1,467 devices producing digital currencies.”

In addition, the report by the Ministry shows that the owners of these illegal mining facilities also provide services to other miners. The services they offer include installing mining rigs, connecting them to the power grid, and providing security apparatus for these illegal facilities.

Having clamped down on these illegal miners and uncovered their illicit activities, the Government, in partnership with experts, are working towards establishing the market value of all the 1,467 mining equipment and the amount of electricity they have consumed.

Similarly, the Law Enforcement Agents are gathering evidence to charge the operators of these illegal crypto mining facilities. It is believed that Part 2 of Art. One hundred seventy-one of the Criminal Code of the Russian Federation titled "Illegal entrepreneurship" and Part 2 of Act 165 titled "Causing property damage by deception or abuse of trust" will form the basis of the law that will be used against these operators.

Our research shows that this is not the first time the Government agencies have uncovered illegal mining facilities within the Russian Suburb. Some of the past discoveries include;

Illegal Crypto Mining Activities In The Past

Image: CoinQuora

In Makhachkala Vodokanal, an area in the Republic of Dagestan in Russia, about 95 illegal mining rigs were found by Rossetti Severnyi Kavkaz. Rosetti, a local power grid operator and distributor, found illegal crypto mining at the Republic's water supply utility facility in Makhachkala Vodokanal.

The main hardware for the mining operation was installed in a metal container at the Vuzovskoe Ozero pumping station. After uncovering the hideout, experts established that the illegal crypto farm was working at a power capacity of 260 Kilowatts, and its electricity consumption exceeded 4.5 million Kilowatt per hour.

The total consumption amounts to more than 26 million rubles, equivalent to over $400,000. Investigation showed that the illegal facility was set up by a resident of Dagestan in partnership with employees of the Water utility facility.


You might be wondering why the same region in Russia is the choice destination for these illegal crypto mining activities. It is common knowledge that cryptocurrency mining is energy-intensive. To avoid paying the high energy bills, these operators prefer regions with cheap energy sources and favorable climate conditions.

Authorities and Government agencies are taking all steps to ensure the clampdown on all illegal mining facilities and reduce their acts to the barest minimum.

Similarly, the Government is trying to curb mining with household electricity, and the Russian anti-monopoly agency suggested higher electricity rates be introduced to those households engaging in crypto mining.

Also, Russia's Ministry of Economic Development proposes reducing the fees needed to set up mining facilities, farms, and data centers. The Government will also offer reduced energy rates for legal mining facilities.

Finally, No matter how hard and strict the rules against illegal mining activities are, operators of illegal mining facilities will never cease to carry out their illegal acts.

Author: Valentine. A, Gate.io Researcher

This article represents only the researcher's views and does not constitute investment suggestions.

Gate.io reserves all rights to this article. Reposting of the article will be permitted, provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.

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