Igor Runets, the founder of Russia’s largest cryptocurrency mining company BitRiver, is under house arrest on tax evasion charges, Bloomberg reported on Monday. Lunetz was taken into custody on Friday and faces three charges of allegedly concealing assets to evade taxes.
Lunetz’s legal team now has a small window to appeal the house arrest before it is fully imposed on Wednesday. If the appeal is unsuccessful or not filed, Runette will remain at home throughout the case, according to RBC.
Runets, 39, is a top pioneer in Russia’s cryptocurrency mining industry, Bloomberg reported on Monday. He founded BitRiver in 2017 and has since expanded it to 15 data centers with more than 175,000 servers and 533 megawatts of capacity. The United States imposed sanctions on BitRiver in 2022 after Russia invaded Ukraine. By comparison, MARA Holdings, one of the largest U.S. Bitcoin miners, has 1.8 gigawatts of mining capacity.
The Stanford MBA graduate began building a cryptocurrency mining data center in Siberia in 2017. Before long, BitRiver was attracting customers from all over the world, including the United States and China. As Bitcoin prices peaked, soaring nearly 650% to over $62,000 in October 2021, cryptocurrency mining became increasingly profitable at the time, according to CoinDesk.
Also, on Monday, ILocal news agency Kommersant reports that BitRiver is facing the possibility of bankruptcy after a subsidiary of the En+ Group filed a bankruptcy application with the regional arbitration court. The dispute centers on the failure of BitRiver’s parent company, Fox Group, to deliver prepaid mining equipment, with claimants seeking more than $9.2 million. A court-ordered freeze of accounts related to the case could disrupt operations at a company that once controlled more than half of Russia’s industrial cryptocurrency mining capacity.
The legal challenge comes at a time when BitRiver is already facing pressure from rising energy debts, equipment disputes and internal turmoil, Kommersant reported, citing people familiar with the matter.
Some data centers have reportedly been shut down due to regional mining bans, while most senior managers have left over the past year. Analysts told the newspaper that the BitRiver collapse could accelerate consolidation in Russia’s mining industry and reshape expectations for the industry’s power demand.
It has become common for miners to face financial difficulties following the recent halving event, which saw rewards cut in half and profit margins squeezed. As electricity costs rise and Bitcoin prices fall, most miners have turned to providing data centers to host computers for artificial intelligence and cloud computing companies, diversifying their businesses away from mining.