The secret history of stealing electricity for mining: Collusion with insiders in the power supply company, with the most cases of stealing electricity in Heilongjiang Province

For the mining industry, electricity costs are a matter of life and death. Many miners travel around the world to find cheap electricity.

At the same time, in some invisible and hidden corners, the "rats" who steal electricity for mining are ready to move.

Using stolen electricity, they mine in chaotic shantytowns, in school computer classrooms, in closed supermarkets, next to railways, and in remote oil-producing areas... According to statistics, among criminal cases involving Bitcoin in China in 2018, stolen electricity for mining accounted for 12%.

What's worse, the stolen electricity is even exported... The huge profits tempt people to take risks, regardless of the consequences, until they fall into the abyss.

01 Stealing electricity for mining

"I stole electricity." Shanxi miner Sun Tao told a blockchain reporter bluntly.

He is a white-collar worker who works in the sales department of a factory. In 2017, a friend told him that he had earned 100,000 yuan by mining Ethereum with a graphics card mining machine.

That was the first time Sun Tao heard that mining could make money. Not long after, he followed his friends and started his mining career.

He used his own savings of 30,000 yuan to buy five L3+ mining machines to mine Litecoin, “just to make some pocket money.”

After buying the mining machine, he had little money left to pay the electricity bill. Seeing the price of the currency rising day by day, he decided to take a risk - stealing electricity to mine.

He rented a room in a shantytown to store the mining machine. He chose the shantytown because it was "rather chaotic and there were many people stealing electricity."

Then he found an electrician he knew and pulled a wire from the main line in that area to his room.

One L3+ mining machine can mine 50 yuan of Litecoin per day on average, and 5 machines can mine 250 yuan. After 4 months, he earned back the money he paid for the mining machine.

For fear of being discovered, Sun Tao moved the machine out of the shantytown soon after.

Lei Hua, principal of Puman Middle School in Jiahe County, Chenzhou City, Hunan Province, was much more unlucky.

In November 2018, the media reported that he placed eight mining machines in his personal dormitory and computer classroom at school, mining Ethereum day and night, and the school reimbursed all the electricity bills of 14,700 yuan. After the incident, Lei Hua was dismissed from his post.

Stealing civilian electricity, as done by Sun Tao and Lei Hua, is the most basic and common practice in the field of stealing electricity for mining.

The real "electricity theft" is stealing electricity from enterprises. A well-known case is the Bitcoin mining machine theft case in Daqing Oilfield at the end of 2017, in which the amount of electricity stolen reached 3.21 million yuan.

This mine that steals electricity was built in an electric repair shop in the suburbs of Daqing City and is under the management of the Daqing Oilfield Oil Production Plant. The factory door is closed, but the buzzing sound can be heard 50 meters away. There are also about 10 fans installed one by one on the wall.

After a patrol, the security department of Daqing Oilfield suspected that there were Bitcoin mining machines in the factory and reported it to the police. The police investigation found that there were a total of 1,000 Bitcoin mining machines in operation in the factory.

Police seized the mining machine in operation

The amazing thing is that this plant has been running for a month, but it has only consumed 200 kWh of electricity. In fact, even if these 1,000 mining machines are only turned on for one day, the power consumption is more than 200 kWh.

The police also found that the power connection method of this factory was very formal: each machine had a separate distribution cabinet, and cables as thick as an adult's wrist were connected to a high-voltage wire box 30 meters away from the factory. The lead seal in the high-voltage wire box had long been opened and tampered with.

It was calculated that this factory stole more than 3.88 million kilowatt-hours of electricity, with the amount of stolen electricity reaching more than 3.21 million yuan, while the person in charge of the factory only paid one or two thousand yuan in electricity bills each month.

Another case occurred in the Yan'an oil-producing area in August 2017. Based on reports from the public, the police seized five mines that stole electricity from the high-voltage lines of the oil field within one day, each of which had one or two hundred mining machines.

Many times, collusion between miners and power supply company staff is a prerequisite for the successful theft of electricity.

One day in April 2014, Zhang Wang, an employee of Guiyang County Power Supply Company, was visited by his good friend Lei Lingli.

The latter said that he was going to open a studio to produce bitcoins, "one bitcoin can be sold for 3,000 yuan, and the lowest can be sold for more than 1,000 yuan."

But mining Bitcoin requires a lot of electricity, and if you pay the electricity bill, you won’t make any money. Lei Lingli said he hoped Zhang Wang would help him steal electricity.

Zhang Wang thought of the Guiyang switch station of Chenzhou Electric Power Bureau, where there is a special transformer with a capacity of 200 kVA, which is used to supply power to the training base of the power bureau.

According to regulations, the Guiyang County Power Supply Company should report its electricity consumption to the Chenzhou Electric Power Bureau every month. But Zhang Wang found that no one cared about it. The electricity consumption had not been checked for several years. There was no one in charge of the substation, and the gate was not locked.

Therefore, Lei Lingli rented the second floor of a villager's house in a village near the switch station and opened a Bitcoin studio. They hired two migrant workers to dig a trench and connect the cable from the studio to the transformer of the Guiyang switch station.

In the era when ASIC mining machines had not yet dominated the market, the studio had more than 30 computer hosts for mining, and each chassis consumed 0.8-0.9 kWh of electricity per hour.

The studio had not installed an electricity meter or paid the electricity bill until the crime was exposed in July 2015. According to statistics, the studio had stolen 94,349KWh of electricity, with a total amount of 83,800 yuan.

02 Heilongjiang has the most cases of electricity theft

2017 was the most prosperous year for Bitcoin, with its price rising more than 20 times from $900 at the beginning of the year to nearly $20,000. Illegal and criminal activities related to Bitcoin, such as stealing electricity for mining, also surged.

A search for the word "Bitcoin" on the China Judgments Online website shows a total of 363 judicial documents, including 11 from 2014, 15 from 2015, 51 from 2016, 111 from 2017, and 169 from 2018.

A blockchain reporter found that among the 169 cases involving Bitcoin in 2018, 20 were cases of stealing electricity for mining, accounting for 12% of the total number of cases. The suspects were all charged with theft.

The places where these electricity theft incidents occurred were concentrated in six provinces: Heilongjiang, Hebei, Liaoning, Hubei, Liaoning, Shanxi and Anhui.

Among them, the most cases of stealing electricity for mining occurred in Heilongjiang Province, with 9 cases, accounting for 45% of the total number of cases. In addition, there were 2 cases of stealing electricity for mining in Anhui, and 1 case each in Hebei, Liaoning, Hubei and Shanxi.

Among these 20 cases, the smallest amount of electricity theft was 2,882 yuan, and the main culprit was sentenced to seven months in prison, suspended for one year; the largest amount of electricity theft was 104,000 yuan, which occurred in Datong, Shanxi, and the main culprit was sentenced to three years and six months in prison and a fine of 100,000 yuan.

In this case of stealing electricity worth 104,000 yuan, the main culprit Xu Xinghua stole electricity for railway use. In November and December 2017, he three times connected a wire from a pole at Datong Kouquan Station to his rented bungalow, where there were 45 Bitcoin mining machines. In the less than five months before the incident, he mined a total of 3.2 Bitcoins, making a profit of 120,000 yuan.

After the incident, Xu Xinghua was ordered to repay the stolen electricity fees to Datong West Power Supply Section of Daqin Railway Co., Ltd., and the mining machine was confiscated.

When analyzing the data on electricity theft cases, a blockchain reporter discovered an interesting phenomenon: all nine cases of stealing electricity for mining in Heilongjiang Province occurred in Daqing City.

Among these nine cases of stealing electricity for mining, eight of them involved the theft of electricity for Daqing Oilfield. The smallest amount of electricity stolen was 5,359 yuan, and the main offender was fined 10,000 yuan. The largest amount of electricity stolen was 27,300 yuan, and the main offender was sentenced to one year and six months in prison, suspended for two years, and fined 27,000 yuan.

"In Daqing, many miners are frantically stealing electricity. Nine people have been sentenced, but there are countless people who have been caught but not sentenced." Miner Zhang Yuanjian told a blockchain reporter that after the sharp drop in Bitcoin this year, many second-hand mining machines have flowed to Daqing.

He also revealed that besides Daqing, another city where stealing electricity for mining is very popular is Tangshan.

"The situations in Tangshan and Daqing are similar. Although only one case of stealing electricity for mining was uncovered in Tangshan in 2018, the practice of stealing electricity for mining is very common in the local area," said Zhang Yuanjian.

03 Stealing electricity abroad

Why do electricity-stealing "rats" like to hang out in cities like Tangshan and Daqing?

These cities have one thing in common: they either have oil fields or coal mines, and their resources are abundant and easy to obtain.

Take Daqing as an example. "Daqing's oil wells are very scattered, and many of them are in remote villages, lacking supervision." Zhang Yuanjian said that it is not easy to be discovered if wires are laid on the high-voltage wires of oil wells.

A mine that steals electricity by pulling private wires

Sun Xu, a miner from Tangshan, told a blockchain reporter that there is a tradition of electricity theft in Tangshan. As early as ten years ago, the phenomenon of electricity theft in Tangshan was rampant. At the worst time, due to the unstable voltage caused by electricity theft, the light bulbs in his house "could not light up completely."

Since the emergence of Bitcoin mining machines, many people who were accustomed to stealing electricity have begun to turn to stealing electricity for mining.

In the Tangshan section of Baidu Tieba, there is a post titled "Attention to those who are still stealing electricity, this time it's for real." A netizen said in it that Kaiping District in Tangshan has many mining machines and is the main battlefield for stealing electricity.

This statement was confirmed in a report in the Legal Daily in November 2018. The report stated that since 2016, the Kaiping area of ​​Tangshan City has lost more than 2 billion kilowatt-hours of electricity, causing the loss of state-owned assets of several hundred million yuan.

Under such circumstances, the relevant departments in Tangshan will certainly not sit idly by. During the special campaign to combat electricity theft in 2018, the Tangshan Public Security Bureau confiscated more than 3,100 Bitcoin mining machines. In a case of electricity theft uncovered in October alone, 790 Bitcoin mining machines were confiscated - among the people involved in the case, there was also an employee of the power supply company.

"Several of my friends have been arrested." Sun Xu said that in June this year, after a miner who stole electricity was sentenced to three years and six months in prison and fined 70,000 yuan, many miners dared not steal electricity anymore.

In addition to Tangshan, Daqing also launched a special campaign against electricity theft. On December 20, the Daqing Oilfield Security Work Conference was held, and the most stringent special campaign in history to "crack down on and rectify criminal activities in the oilfield sector and illegal activities of stealing electricity and oil in winter" was launched.

"In addition to stricter supervision, regulatory technology is also improving. The power supply bureau now has special monitoring robots. Once they detect abnormal power consumption, they will come down to investigate directly." Zhang Yuanjian said that miners who still dare to steal electricity to mine "are all broke because they have no money to celebrate the New Year."

In China, it is becoming increasingly difficult to steal electricity on a large scale. Under such circumstances, some miners have begun to choose to steal electricity abroad.

"My mining machine is hosted in a mining farm in Malaysia, and they steal electricity." Miner Zhang Heng told a blockchain reporter.

He said that in order to steal electricity abroad, one must have a good relationship with the local power department and share the profits with informants there.

It seems that this black industrial chain is still growing wildly.

In the bear market where the price of coins is low, purchasing second-hand mining machines at low prices and doing a "no-cost business" by stealing electricity has become the choice of some miners.

Their mining costs are far lower than the normal costs on the market, and they are guaranteed to make a profit.

But this is a high-risk business. People may end up in jail and mining machines may be confiscated. They are all mentally prepared for this.

"The machines sent abroad cannot be used in China. If something happens one day, we will be left alone," said a miner.

This is a dangerous game on the edge of a knife.