Three English ‘nerds’ were behind a cryptocurrency ‘mine’ found inside an abandoned warehouse which was being powered by £16,000 worth of stolen electricity a month, it was revealed today.
But the illegal Bitcoin mine only generated around £8,000 a month at peak prices, and used huge amounts of electricity siphoned from the national grid by drilling through the floor of the building near Birmingham.
While there are dozens of Bitcoin mines around the UK that purchase electricity legally, often at reduced prices in an attempt to turn a profit, the mine is the second and biggest one to be found illegally hooked up to the National Grid in the West Midlands.
Green campaigners are increasingly speaking out against cryptocurrency because it takes huge amounts of electricity to power the computers used for complicated calculations to ‘mine’ them – and Elon Musk recently stopped Tesla accepting Bitcoin as payment because of the “rapidly increasing use of fossil fuels for bitcoin mining’.
Officers forced entry to the premises in an industrial estate in Sandwell, the West Midlands, on May 18 after tip-offs suggested it was being used as a cannabis farm.
Police heard how lots of people were visiting the unit at different times of day and lots of wiring and ventilation ducts were visible, before a drone picked up a heat source from above.
They are all classic cannabis factory signs – but when officers gained entry they found a huge bank of around 100 computer units, which were understood to be a Bitcoin mining operation.
The owner of a unit on the same estate who did not want to be named told MailOnline that they had seen three English men who ‘looked a bit nerdy and dodgy’ arriving at the unit ‘on and off’ for around eight months.
They added that a hole was seen inside the unit and said that they ‘apparently’ obtained access to the electricity by ‘drilling into the ground and getting it that way’.
The IT equipment was seized and enquiries with provider Western Power revealed the main electricity supply had been bypassed and thousands of pounds worth had been stolen.
Whilst pointing out that cryptocurrency mining is not in itself illegal, West Midlands Police said the set-up was the second using stolen electricity which they had encountered. The latest one is believed to be the largest one found in the UK.
But a leading Bitcoin expert told MailOnline today that the electricity the criminals were stealing was worth around £16,000 a month – £11,000 more than the amount of Bitcoin they would have been generating in the same period.
Dr Tom Robinson, from Elliptic – a firm which tracks cryptocurrency transactions – said: ‘The machines would have generated approximately 0.2 bitcoins per month – worth approximately £5,000 at current prices.’
A cryptocurrency ‘mine’ stealing thousands of pounds worth of electricity from the National Grid has been raided by police
Officers forced entry to the premises in an industrial estate in Sandwell, the West Midlands, on May 18 after tip-offs suggested it was being used as a cannabis farm
Bitcoin and other cryptocurrencies are created or ‘mined’ by high-powered computers. Pictured: The machine that was being used by the criminals appears to cost more to run than it makes in profit. However, because they used stolen electricity, they would have avoided these costs
Bitcoin and other cryptocurrencies are created or ‘mined’ by high-powered computers which continuously solve complex mathematical puzzles in an energy-intensive process that often relies on fossil fuels, particularly coal.
However, many of the computers used to mine bitcoin cost more to run than the value of the Bitcoin they create, making using stolen electricity a lucrative criminal ploy.
One of the selling points of Bitcoin is that it can be used anonymously – meaning the unregulated currency is popular with criminals who have used it to buy drugs and guns.
West Midlands Police’s Sergeant Jennifer Griffin said after the raid at Great Bridge Industrial Estate: ‘It’s certainly not what we were expecting!
‘It had all the hallmarks of a cannabis cultivation set-up and I believe it’s only the second such crypto mine we’ve encountered in the West Midlands.
What is Bitcoin and how does it work?
What are Bitcoins?
Bitcoin is a cryptocurrency – an online type of money which is created using computer code.
It was invented in 2009 by someone calling themselves Satoshi Nakamoto – a mysterious computer coder who has never been found or identified themselves.
Bitcoins are created without using middlemen – which means no banks take a fee when they are exchanged.
They are stored in what are called virtual wallets known as blockchains which keep track of your money.
One of the selling points is that it can be used to buy things anonymously.
However, this has left the currency open to criticism and calls for tighter regulation as terrorists and criminals have used to it traffic drugs and guns.
How are they created?
Bitcoins are created through a process known as ‘mining’ which involves computers solving difficult maths problems with a 64-digit solution.
Every time a new maths problem is solved a fresh Bitcoin is produced.
Some people create powerful computers for the sole purpose of creating Bitcoins, which can require a huge amount of energy to run.
But the number which can be produced are limited – meaning the currency should maintain a certain level of value.
Why are they popular?
Some people value Bitcoin because it is a form of currency which cuts out banking middlemen and the Government – a form of peer to peer currency exchange.
And all transactions are recorded publicly so it is very hard to counterfeit.
Its value surged in 2017 – beating the ‘tulip mania’ of the 17th Century and the dot com boom of the early 2000s to be the biggest bubble in history.
But the bubble appeared to have burst, and questions arose over what market there is for it long-term.
However, it has since boomed again, and in March 2021, surpassed the $60,000 mark for the fist time.
Why are they bad for the environment?
The process of mining bitcoins is incredibly energy-intensive, meaning the electricity supply is likely to stem from the burning of fossil fuels.
Incredibly, Bitcoin mining firms use more data than all the internet search giants combined.
Microsoft co-founder Bill Gates warned earlier this year that the cryptocurrency was ‘not a great climate thing’.
Billionaire entrepreneur Elon Musk, the owner of electric car firm Tesla, said earlier this month that he was ‘concerned’ about the environmental impact of Bitcoin mining.
Mr Musk wrote in a Tweet: ‘We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.’
‘Cryptocurrency is a good idea… but this cannot come at great cost to the environment.’
The firm then banned customers from using Bitcoin to buy its cars, after revealing in February it had bought £1billion ($1billion) of the world’s biggest digital currency.
‘My understanding is that mining for cryptocurrency is not itself illegal but clearly abstracting electricity from the mains supply to power it is.
‘We’ve seized the equipment and will be looking into permanently seizing it under the Proceeds of Crime Act.
‘No-one was at the unit at the time of the warrant and no arrests have been made – but we’ll be making enquiries with the unit’s owner.’
The owner who spoke to MailOnline about what they saw said: ‘The police turned up last week at some point and they were here from 11pm at night till the end of the next day as everyone was wondering what was going on.
‘They didn’t say much to any of us owners but I know some of the men from that side of the estate did have a look inside the unit and they couldn’t believe how decked out it was.
‘I spoke to my partner about Bitcoin and he explained but you never would have thought that.
‘I mean drugs yes that would make sense and be pretty normal but Bitcoin I never would have guessed.
‘We used to see three guys they’d been coming for around eight months on and off.
You’d see them a few times and then all of a sudden they’d disappear for a month.
‘But they were all English and just looked a bit nerdy and dodgy they just had that look about them that you know something ain’t right.
‘That side of the estate though is all cars and mechanics and not as nice as this side and this side has cameras too and they definitely knew that.
‘I reckon they were here for at least eight months but they’ve all gone now and we haven’t seen them for a while.
‘We have all been speaking about it and one of the guys who saw inside said that there was a hole in the ground.
‘Apparently that’s how they’d got the electricity by drilling into the ground and getting it that way.
‘It would I imagine be concrete too so that says it all how clever they were.
A mechanic who works at one of the industrial units but wished to remain anonymous said: ‘They’ve all just scarpered now and we haven’t seen them for ages.
‘There was three of them and they used to work just around the corner from where I do.
‘I had no idea what was going on until all the police showed up and we found out.
‘They we’re very quiet didn’t say a lot but we knew there was three of them.’
When the price of bitcoin was at its peak last month the machines would have made just over £8,500 a month.
Explaining why cryptocurrencies are popular with criminals, Dr Robinson said: ‘Cryptocurrencies are used by some cybercriminals because of their unique combination of properties.
‘They are ‘censorship resistant’ – no one can prevent a criminal from transacting in bitcoin for example, because there is no central point of control that has the power to block transactions – unlike traditional payment systems.
‘They are also digital, which allows cryptocurrencies to be easily transferred across the world through the internet, and also makes them very easy to conceal and store.’
The cryptocurrency mining raid comes after bank NatWest yesterday issued an alert to people to beware of scams involving the digital money.
The bank said it has prevented millions of pounds from being sent to ‘crypto-criminals’.
The frauds typically involve criminals posting adverts online carrying a bogus celebrity endorsement on a fake website with an article promoting cryptocurrency.
Investors are asked to complete a contact form and the criminal uses these details to follow up with a telephone call.
During the call the fraudster, posing as a cryptocurrency trader, helps the victim open a wallet with a cryptocurrency trading platform and in the process persuades the victim to install remote access software onto their computer.
Initially the victim transfers a small amount of money to the wallet, but over time they are persuaded to invest far larger sums. Remote access software is then used to empty the victim’s cryptocurrency wallet.
Police heard how lots of people were visiting the unit at different times of day and lots of wiring and ventilation ducts were visible, before a drone picked up a heat source from above. They are all classic cannabis factory signs – but when officers gained entry they found a huge bank of around 100 computer units, which were understood to be a Bitcoin mining operation
The owner of a unit on the same estate who did not want to be named told MailOnline that they had seen three English men who ‘looked a bit nerdy and dodgy’ arriving at the unit (number 8, pictured) ‘on and off’ for around eight months
They added that a hole was seen inside the unit and said that they ‘apparently’ obtained access to the electricity by ‘drilling into the ground and getting it that way’
The owner of a unit on the same estate who did not want to be named told MailOnline that they had seen three English men who ‘looked a bit nerdy and dodgy’ arriving at the unit ‘on and off’ for around eight months. They added that a hole was seen inside the unit and said that they ‘apparently’ obtained access to the electricity by ‘drilling into the ground and getting it that way’
NatWest is offering customers free software to help with added online protection and recently introduced a manage my limits feature online which enables customers to restrict the amount of money that can be transferred out of their account.
Jason Costain, head of fraud prevention at NatWest, said: ‘We have prevented millions of pounds from being sent to crypto-criminals who are exploiting the high levels of interest in the currency.
‘However, consumers should always be alert, especially to the use of fake websites and bogus celebrity endorsements.’
More than half of the world’s cryptocurrency supply is ‘mined’ in China.
It is feared the power-hungry business could hinder China in meeting carbon-neutrality goals, according to some analysts.
The annual energy consumption of China’s bitcoin industry is expected to peak in 2024 at about 297 terawatt-hours, exceeding the total power consumption level of Italy and Saudi Arabia in 2016, according to a study recently published in scientific journal Nature Communications.
It prompted Microsoft co-founder Bill Gates to highlight the negative impact mining Bitcoin has on the environment.
‘Bitcoin uses more electricity per transaction than any other method known to mankind,’ Gates said, speaking to the The New York Times.
‘It’s not a great climate thing’, he added.
The complexity of the mathematical puzzles solved by cryptocurrency computers means their processors require huge amounts of energy.
Studies have shown that the annual carbon emissions from the electricity generated to mine and process the cryptocurrency is equal to the amount emitted by whole countries, including New Zealand and Argentina, with the upper-bound estimate being higher than that of even the UK.
West Midlands Police’s Sergeant Jennifer Griffin said after the raid at Great Bridge Industrial Estate (pictured): ‘It’s certainly not what we were expecting! ‘It had all the hallmarks of a cannabis cultivation set-up and I believe it’s only the second such crypto mine we’ve encountered in the West Midlands’
Bitcoin mining’s energy consumption also eclipses that of the world’s major tech companies that provide entertainment services, including the streaming giant Netflix as well as Apple, Facebook, Microsoft and Google combined – all of which also require huge amounts of energy to run their services.
By comparison, Google – the largest energy consumer of the tech giants – used 10 TWh in 2019.
On March 13, Bitcoin was using 130.9 TWh (annualised). The UK’s electricity consumption is slightly more than 300 TWh a year.
Data from the Cambridge Bitcoin Electricity Consumption Index (CBECI) shows that the energy consumed by Bitcoin increased to its highest ever levels towards the end of last year, with the rates continuing to rise into 2021.
Last month, the price of Bitcoin reached a record high of £45,797 ($64,895) before plummeting this month to a low of £24,177 ($34,259) on Sunday.
The sell-off was prompted by fears of a Chinese crackdown on the cryptocurrency.
Bitcoin’s current price of £25,245.16 ($35772.20) is still almost twice as high as what it was six months ago – when it was £13,441.14 ($19,046). A year ago, it was trading at just under £6,500 (£9,193).
Criminals who use anonymous cryptocurrencies make use of what are known as ‘treasure men’ to turn their ill gotten gains into real cash.
Pictured: A graph showing the value of Bitcoin throughout its lifespan. Bitcoin passed the $60,000 mark for the first time on Saturday, with analysts saying the giant US stimulus package helped boost the world’s most popular virtual currency on its record-breaking run
Pictured: A graph showing the amount of energy in terawatt hours (TWh) consumed by tech giants, electric vehicles and Bitcoin mining (lower, central and upper bounds). The bar second from right shows the current annual bitcoin consumption, that on March 3 was at a rate of 130.9 terawatt hours (TWh), roughly the same as New Zealand and Argentina
The Financial Times reports how these individuals will hide bundles of cash so they can be picked up by criminal partners.
Elliptic’s Dr Robinson told the outlet: ‘They will literally leave bundles of cash somewhere for you to pick up.
‘They bury it underground or hide it behind a bush, and they’ll tell you the coordinates. There’s a whole profession.’
The paper also reported how at least (£247million) $350million was paid in cryptocurrency ransoms to hacker gangs in 2020.
Earlier this week, an ‘irresponsible’ advert on the London Underground which encouraged commuters to buy Bitcoin was banned by the Advertising Standards Authority (ASA).
The poster, which was plastered on the underground network by cryptocurrency exchange Luno, read: ‘If you’re seeing Bitcoin on the underground, it’s time to buy.’
The ASA said the advert was misleading and left out important risk warnings.
ASA rules say that adverts must be clear that the value of investments can go down as well as up.
The poster should have had such a risk warning, as well as telling potential customers that both Luno and Bitcoin are unregulated.