Igor Runets, who founded BitRiver, Russia’s largest crypto mining company, is under house arrest on tax evasion charges, Bloomberg reported on Monday. Runets was arrested on Friday and faces three charges for allegedly hiding assets to evade taxes.
Runets’ legal team now has a small window to appeal the house arrest before it becomes fully enforceable on Wednesday. If the appeal is unsuccessful or not filed, Runets will remain homebound throughout the case, according to RBC.
Runets, 39, is one of the leading pioneers of Russia’s crypto mining industry, Bloomberg reported on Monday. He founded BitRiver in 2017 and later expanded it to 15 data centers with more than 175,000 servers and a capacity of 533 megawatts. The United States sanctioned BitRiver in 2022 following the Russian invasion of Ukraine. For comparison, MARA Holdings, one of the largest US bitcoin miners, has 1.8 gigawatts of mining capacity.
The Stanford University MBA graduate began building a crypto mining data center in Siberia in 2017. Soon after, BitRiver attracted clients from around the world, including the US and China. And when the price of bitcoin peaked, rising nearly 650% to over $62,000 in October 2021, according to data from CoinDesk, mining the cryptocurrency became increasingly profitable at that time.
Also, on Monday, ILocal news agency Kommersant reported that BitRiver is facing possible bankruptcy after a subsidiary of the En+ Group filed an insolvency claim in a regional arbitration court. The dispute centers on allegations that BitRiver parent Fox Group failed to deliver prepaid mining equipment, with the plaintiff seeking more than $9.2 million. Court-ordered account freezes linked to the case could disrupt operations of a company that once controlled more than half of Russia’s crypto mining industrial capacity.
The legal challenge comes as BitRiver is already under pressure from mounting energy debts, equipment disputes and internal turmoil, Kommersant added, citing sources familiar with the situation.
Several data centers have reportedly already been closed amid regional mining bans, while a large portion of senior management has left over the past year. Analysts told the newspaper that a BitRiver collapse would likely accelerate consolidation in Russia’s mining sector and change expectations about the industry’s electricity demand.
Miners facing financial problems have been widespread after the recent halving, which cut rewards in half, reducing profit margins. With rising energy costs and falling bitcoin prices, most miners have pivoted to offer their data centers to host computing machines for artificial intelligence and cloud computing companies, diversifying their businesses beyond mining.
