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Kazakhstan: Police arrest gang forcing IT specialists to operate block reward mining farms

Kazakhstan law enforcement agents have arrested members of a local organized crime gang suspected of operating a highly profitable illegal underground block reward mining farms through an elaborate racketeering scheme. 

In a press release, the Kazakh Ministry of Internal Affairs (MIA) stated that the arrests were made through a joint operation carried out by its Department for Combating Organized Crime, Department 5 of the National Security Committee (also KNB), and the police departments of the cities of Almaty, Shymkent, Aktobe and Zhambyl. 

A total of 23 persons were detained, some of whom were described by authorities as ex-convicts with records of acquisitive and violent crimes. Included among them was also an army serviceman.

While raiding the gang’s facilities, the operatives recovered bookkeeping records, fake license plates, and weapons such as an AKSU assault rifle, 60 rounds of ammunition, and several pistols. Block reward mining equipment worth over $7 million was also confiscated. 

The MIA says its investigations found that the gang had been forcing a 36-year-old IT specialist to run its illegal block reward mining farm through threats and blackmail. The farm earned the gang an estimated $300,000 to $500,000 monthly. 

Kazakhstan determined to regulate block reward mining

This is not the first time Kazakhstan is cracking down on illegal block reward mining outfits in the country. Earlier this year, Kazakh authorities found and shut down over 100 illegal block reward miners. 

The operation saw it seize over 65,000 pieces of mining equipment worth an estimated $195 million. The government also accused the offenders of various crimes, including operating in special economic zones without permission, illegally using subsidized energy, and tax and customs evasion. 

The illegal mining outfits have also been found to have links to several affluent Kazakh politicians and businessmen. Back in March, Eurasianet reported that a brother of the country’s former president Nursultan Nazarbayev was found to be backing some of the entities. 

Meanwhile, Kazakhstan has also been tightening regulations guiding the local block reward and digital assets industry. It has introduced new license registration guidelines for block reward miners and digital assets exchanges. It has also amended its tax and electricity bill regimes for block reward miners. 

Kazakhstan remains one of the largest global contributors to the hash rate of the Bitcoin network. The country rose in the ranks after its neighbor China banned the activity, forcing an influx of miners to the country. Kazakhstan has also been finding it challenging to meet the energy demands of block reward miners. 

Watch: The BSV Global Blockchain Convention panel, Blockchain mining & energy innovation

New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.

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