Igor Runets, who founded Russia’s largest cryptocurrency mining company BitRiver, is under house arrest for tax evasion, Bloomberg reported on Monday. Runets was arrested 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 an appeal fails or is not filed, the Runets will remain confined to their homes for the duration of 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 Russia’s invasion of Ukraine. For comparison, MARA Holdings, one of the largest Bitcoin miners in the United States, has a mining capacity of 1.8 gigawatts.
The Stanford University MBA graduate began building a crypto mining data center in Siberia in 2017. Soon after, BitRiver attracted customers around the world, including in the United States and China. And as the price of Bitcoin peaked, rising nearly 650% to over $62,000 in October 2021, according to CoinDesk data, mining the cryptocurrency became increasingly profitable at the time.
Also, Monday, ILocal news agency Kommersant reported that BitRiver is facing potential bankruptcy after a subsidiary of En+ Group filed an insolvency petition with a regional arbitration court. The dispute centers on allegations that BitRiver’s parent company, Fox Group, failed to deliver prepaid mining equipment, with the plaintiff seeking more than $9.2 million. The court-ordered account freeze related to this case could disrupt the operations of a company that once controlled more than half of Russia’s industrial crypto-mining capacity.
The legal challenge comes as BitRiver is already under pressure from rising energy debts, equipment disputes and internal unrest, Kommersant added, citing sources familiar with the matter.
Several data centers have already reportedly been closed due to regional mining bans, while a large portion of senior management have left the company over the past year. Analysts told the newspaper that a BitRiver collapse would likely accelerate consolidation in Russia’s mining sector and reshape expectations for the industry’s electricity demand.
Miners facing financial difficulties is a widespread phenomenon after the recent halving event, which cut rewards in half, thereby reducing profit margins. With rising energy costs and falling Bitcoin prices, most miners have decided to offer their data centers to host computing machines for AI and cloud computing companies, thereby diversifying their businesses away from mining.
