Chinese Crypto Miner’s Tragedy: A Cheap Electricity Swindle in Qinghai
Although the current crypto market activity is spiking, the volumes are will lackluster when compared to those seen at the height of 2018’s speculative mania. The long-term crypto winter doesn’t seem to end in a short time while miners can be easily lured in low electricity scam in this situation.
A Chinese mining operator shared his miserable experience of a broken wealth dream under an assumed name of Han Jie. In his story, everything starts with cheap electricity.
In September 2018, Han heard from a friend that the electricity cost in Qinghai Province is extremely low. He also informed that the Alien mining company, a subsidiary of Rijing Optoelectronics in Delingha city is leasing mining machines and mining factory for crypto miners, meanwhile, the firm also offers electricity at 0.33 yuan ($0.05) per kWh.
This was so attractive to Han. He used to operate a mining factory in Sichuan, and he fully understood that the electricity cost determines the mining profit especially in the current beat market. As thus, after Sichuan entered the dry season, Han decided to transform his mining business to Qinghai.
Han and three partners went to Qinghai for a field trip in last September. Cao Quanfu, the director of Business Development received them.
“Cao showed me a lot of documents, including the government and electricity bureau approval for using electricity facilities, and I thought it is a regular enterprise,” said Han.
He also mentioned a tripartite agreement titled “Strategic Investment Framework for Blockchain Industry”, which showed the Rijing Optoelectronics, Juying Network, and Delingha municipal government were cooperating on a blockchain project.
“Rijing Optoelectronics is a leading enterprise in Qinghai, and it covers an area over 400,000 m2,” he added. Its subsidiary Alien Mining claimed that it could hold 500,000 mining devices.
After the investigation, Han and his partners ordered 150,000 miner slots and paid 12.7 million yuan for deposit. Han ordered 20,000 slots. According to the contract, Rijing Opto-electronics should hand over the slots in three deliveries by November 30, 2018. Han paid 2 million yuan deposit which could be used to offset the electricity bill. The electricity cost is 0.33 yuan per kWh.
Han and his partners brought their mining devices to Qinghai and started their business on Oct 16, 2018.
However, his sweet dream ended only 4 days later. On October 20, Huang Yi, the legal representative of HuojianKe Technology, another subsidiary of Rijing Opto-electronics came to their mining factory, asked all the miners to shut down their mining devices in half an hour and raised nearly 30% of the electricity cost, from 0.33 yuan/kWh to 0.42 yuan/kWh.
Han and his partners decided to leave after Huang claimed that the contract they signed is invalid. However, they were informed that they must pay off the electricity fee at 0.42/kWh before they could leave, which is quite ridiculous and they finally realized it is an electricity swindle.
On the following day, they decide to take all their mining devices to run away from this horrible place, unfortunately, their escape doesn’t seem going on very well. Han remembered that Rijing’s security guards jumped on the moving car and smashed 4 mining devices.
“They also threatened us that they would smash all the mining machines if we refused to stop,” said Han.
After days of protracted stalemate, they were forced to pay the electricity bill and leave the factory.
“We have no choice, over 20,000 miners were shut down, that is a great loss to us.”
It was also reported Rijing Opto-electronics suffered huge losses due to mismanagement due to the mismanagement and the industry circumstance. The firm has applied a 0.3 yuan/kWh Polysilicon produces electricity, and they use the low electricity cost as bait to cheat poor crypto miners.