Despite strict rules and regulations, Chinese are not abandoning crypto mining. Recently, police of Hengyang, a city located in China’s Hunan province, arrested 15 men for bribing internet cafes’ staff to mine cryptocurrencies. The police reported that about 9,000 computer administrators were involved in mining activities. Over a time period of 4 months ending in July 2019, cryptocurrency of worth more than $14 million or 100 million yuan was mined by suspects in custody.
After receiving a lead regarding illicit mining, the Shigu Branch of the Hengyang Municipal Public Security Bureau of Hunan Province started investigations at the end of 2018. Then, upon analyzing the computer hardware and software in internet cafes, a cryptojacking malware was discovered.
Cryptojacking malware, running in the background are not easily detectable on a computing device. By stealing computing resources and power, the malware uses device to mine valuable cryptocurrencies such as bitcoin. Although it might not stand out on screen, the malware impacts the performance of the computing machine. Usually, it slows down the computer speed substantially and puts excessive load on the hardware.
According to police, a network technology company in Zhengzhou was responsible for developing the malware. Furthermore, it was revealed that the head of the company, Zhang, was remotely controlling the malware after installing it in different net cafes and bribed cafe administration in order to install cryptojacking malware in computers.
Roughly about 2,000 people received a commission every month from Zhang and according to a rough estimate, 20 million yuan had been paid in commission to various people. But as revenue from cryptocurrencies was valued at 100 million yuan, Zhang profited from the business of mining cryptocurrencies even after bribing staff.
Police also stated that Zhang wasn’t operating alone as he was accompanied by several other people. Soon after the department got details of other members, a team of 200 police officers was dispatched to arrest the people responsible. Consequently, 15 men were arrested by police and about 100 million yuan in cash was retrieved.
Zhang, a computer scientist, realized the prospects of cryptocurrency and mining in 2016. Later, he discussed mining business with other shareholders and succeeded in convincing them. Apart from Zhang, there were 3 other shareholders.
Together in a team, Zhang and company persuaded net cafes and entered in the crypto mining business. Along with economic prospects, financial incentives offered by Zhang proved to be quite appealing for the administrating staff. Ultimately, Zhang’s network company expanded drastically and so did his profits.
Although several arrests had been made, the suspects are detained and subjected to further investigation while ruling judgement will be made in the future. According to remarks given by the director of the Shigu Branch of the Public Security Bureau of Hengyang City, Zhu Jianshe, this wasn’t a small case and said:
This case involves a wide range of cases, the number of people involved, and the strong concealment is unprecedented. It can be said that it is a typical high-tech crime.
This wasn’t a first for some Chinese to illegally mine cryptocurrency. A few months ago, a 61-year old woman was arrested and tried in court for stealing electricity and mining bitcoin. She was fined and jailed 4 months by the court.
In the month of July, Chinese authorities seized 4,000 crypto mining devices and arrested 22 people. At that time, it was estimated that almost $3.2 million worth of energy was stolen in 2018 because of crypto mining.
Bitcoin mining is a flourishing industry, aiming to break $15 billion mark in early 2020. While the profit of miners is mainly dependent on the price of cryptocurrency they mine, miners prefer places with low electricity costs. Iran has legalized crypto mining to help stabilize economy, miners are concentrated in China due to the low prices of electricity.
Although Zhang was arrested for his illegal activities, he showed that crypto mining industry has immense potential. In the future, it would be of interest to see how authorities balance the positive and negative impacts of crypto mining in trying to regulate the industry.