Bitcoin cryptocurrency mining company operating in Akron, Ohio

Bitcoin cryptocurrency mining company operating in Akron, Ohio

  • Company runs thousands of bit mining machines in century-old Akron factory
  • BIT Mining evolved from sports lottery service to cyrptocurrency leader
  • Bit miners face scrutiny from law enforcement in U.S.

An international company that once operated the world’s largest data center in China now runs an expansive cryptocurrency mining business on Seiberling Street in Akron with the ability to draw enough electricity to power 63,000 homes.

BIT Mining Ltd., which partnered with Viking Data Centers to operate in the former Maxion Wheels and Goodyear manufacturing plant, runs thousands of machines there designed to “mine” cryptocurrencies like bitcoin, ethereum and dogecoin.

How many machines? It can vary as the company optimizes the space, but a recent announcement from BIT Mining gives perspective on the scale of the operation.

In its first-quarter 2023 statement issued in May, BIT Mining said its Hong Kong subsidiary Bee Computing, which manufactures dogecoin-mining machines, had produced 7,920 devices and deployed them all in Akron. Dogecoin is an emerging cryptocurrency that has been mentioned on X — formerly Twitter — by eccentric billionaire Elon Musk.

Settling in on Seiberling Street in Akron

Crypto mining and associated businesses are drawing billions of dollars of investment from around the world, attracting the attention of investors, regulators and law enforcement agencies.

The process of searching through trillions of numerical combinations to create new cryptocurrency units requires vast amounts of electrical power, and the industry has been widely criticized for its energy usage. One estimate concluded worldwide mining for bitcoin — just one cryptocurrency — uses as much energy each year as Switzerland.

Companies like BIT Mining and pools of crypto miners around the world comprise a decentralized system that provide accounting and verification of cryptocurrency transactions. In the process, they produce “coins” that expand a cryptocurrency’s units while providing a record of transactions. The process requires lots of machines and lots of energy to run the specialized computers.

In BIT Mining’s case, a switching station was completed earlier this year near the Akron operation, bumping up its available electrical supply to 83 megawatts (MW) daily.

Insider Monkey recently ranked BIT Mining as the world’s 15th largest bitcoin mining company by market capitalization. The business boasts some impressive investors, including Israel Englander’s Millennium Management hedge fund. Other investors include SC CHINA HOLDING, Wolverine Trading, Susquehanna International Group and Morgan Stanley.

BIT Mining is incorporated in the Cayman Islands, but it started in China as a sports lottery service. The company said in financial reports that it has shed that early business, hoping to grow its crypto mining and data processing operations into a world leader. It maintains its own “wallet,” a term for a cryptocurrency account, while hosting mining pools comprised of other miners.

In May 2021, “we were operating a total of 435 MW of 100% sustainable, hydropower energy and had built the largest data center in the world to date — a 300 MW hydropower facility in Sichuan province,” BIT Mining Chairman Bo Yu said in a recent open letter to investors.

When the Chinese government banned all crypto transactions later in 2021, BIT Mining turned its attention to operations in Kazhakstan, a central Asian country where coal power is abundant. When its Kazhakstan operation subsequently experienced difficulties, it moved its focus to Akron and aligned with Viking Data Centers.

In September 2021, according to U.S. Securities and Exchange documents filed by BIT Mining, the company forged its agreement with Viking Data Centers to run the Seiberling Street site, acquiring a 51% share in the partnership. That stake has since marginally increased. Summit County records show the Viking Real Estate purchase was completed Sept. 28, 2021.

When there were blips this year with its power supply at its Akron operation, it formed another partnership and located thousands of DOGE machines to Texas.

“Our company has twice built incredibly successful businesses which have been halted by governmental regulations, so we are no stranger to reinventing ourselves,” Yu said in his letter to investors.

BIT Mining and Viking Data did not respond to interview requests by email or phone, but extensive financial reports, Summit County property records, and news articles shed some light on the company and its Akron business.

BIT Mining a powerful presence in Akron

The 1919 structure now housing crypto mining equipment was owned by Goodyear Tire & Rubber Co. in the 1980s, but it later became a Maxion Wheels factory. In October 2021, it was sold to Viking Real Estate Holdings for $4.22 million, according to county records.

Once the deal between BIT Mining and Viking took place, BIT Mining moved to increase the electrical power available at the site. Because crypto mining operations consume considerable energy, companies scan the globe for reliable sources of power to keep the mining machines running — the more power, the more machines that can be run and the better chance for profit.

BIT Mining was able to increase its potential draw on the grid to about 83 MW per day after FirstEnergy’s American Power Transmission unit completed two new switches on the East Akron-Evans transmission line near Goodyear’s headquarters. That’s less than half the capacity of a small automobile manufacturing plant. In 2010, peak usage at the Empire State Building in New York City was about 9.5 MW per day.

A FirstEnergy spokesman said via email that the new switches help with maintenance and electrical performance issues between two customer-owned substations.

“With the new switches, which can be controlled remotely, we can now isolate a substation or line section that experiences a fault or requires maintenance, for example, while minimizing the outage durations experienced by the other substation,” the company said.

The company referred further questions to the companies that own the substations, one of them being BIT Mining’s partner in Akron, according to county property records.

From sports lottery to dogecoin

SEC documents provide some illumination on BIT Mining’s history and business plan.

The company traces its roots back to Hong Kong, where its offices are maintained, and Shenzhen, according to an April 2022 filing with the SEC.

At the time of its F-20 filing, it incorporated in the Cayman Islands and was still listed on the NYSE as BTCM. Its American depositary shares, required of foreign companies, were listed under the name Limited, with the ticker symbol of WBAI. Ltd. was an online sports lottery service provider in China, founded in 2013. While it operated as an online lottery business, the company said it “collected and processed personal, transactional and behavioral data.”

Since disposing of the business, BIT Mining said in the filing, it no longer collects such information in China.

Further, the company said in an SEC filing that the regulatory situation in China makes it difficult to verify some aspects of its financial audits: “… [T]he audit working papers of our financial statements may not be fully inspected by the PCAOB (Public Company Accounting Oversight Board) without the approval of the PRC authorities. Our ADSs could still be delisted and prohibited from being traded over-the-counter under the HFCA Act determines in the future that it is unable to fully inspect or investigate our auditor which has a presence in China.”

City of Akron: Digital mining ‘runs counter to this administration’s values and policy goals’

Although local, county and state officials have met with or been notified of BIT Mining’s operations in Akron, local officials aren’t clamoring to claim or praise the crypto mining company.

When asked about BIT Mining, the city of Akron’s emailed response concentrated on employment levels at the facility and its high energy usage:

“Members of the City’s Office of Integrated Development have previously met with representatives of Bit Mining Limited to discuss their business operations. The company’s representatives were friendly and forthcoming but the industry as a whole runs counter to this administration’s values and policy goals. Digital mining operations consume an exorbitant amount of electricity, employ very few individuals, and take up a considerable amount of space. Though it does keep the building occupied, we would prefer for large facilities to be used for manufacturing companies who can employ hundreds of people adding to Akron’s economy.”

Akron Ward 10 Councilwoman Sharon Connor said she’d like to know more about the company and is interested in what brought BIT Mining to Akron.

“I’d love to learn more about their business,” she said. “I’m always interested in learning about who’s in the neighborhood.”

Former U.S. Rep. Tim Ryan, however, has a different view. He has landed on the advisory board of Coinbase, the largest U.S. cryptocurrency exchange, and has been a supporter of its data processing centers.

“Ohio is open for business in so many ways with Intel, electric vehicles and Google,” Ryan told the Columbus Dispatch in September. “Why wouldn’t we want to add this into the portfolio of opportunities?”

At the county level, the council president and various agencies were kept apprised of the switching station project and its progress. But the county didn’t help lure BIT Mining to the area, said Greta Johnson, director of communications for Summit County Executive Ilene Shapiro.

“We did not have any role in bringing this business to Summit County,” she said.

The growing world of cryptocurrencies

David Pelleg, a finance professor at Kent State University, said in a phone interview that bitcoin and its crypto cousins offer advantages over traditional currencies.

The process of bitcoin mining, which requires transparency between individuals and collections of individuals participating, creates a shared database of transactions, permanently recording a “perfect” record, he said.

“I don’t need a third party between me and you to transfer a coin,” he said. “Once I have transferred you a coin, I can never get it back. The key is that the blockchain is pure truth.”

Despite that advantage, cryptocurrencies have limited utility right now because they aren’t widely accepted for traditional cash or credit transactions. You can’t, for instance, directly use a cryptocurrency to buy a split-level ranch house or a dozen donuts at Krispy Kreme.

“Right now, you can’t use a bitcoin to settle much commerce at all,” Pelleg said. “It’s not quite there.”

The state of Ohio was the first in the nation in 2018 to accept cryptocurrency to pay business taxes. That program was suspended, however, the following year.

Pelleg said the cryptocurrency world will continue to grow and mature much as internet businesses evolved in their early days, with user preferences determining winners and losers — think Google vs. Yahoo and AOL.

“It’s just on the brink of starting to have value,” Pelleg said. “Regulators are just about ready to come to grips with it.”

The ups and downs of crypto mining

Like any emerging industry, the cryptocurrency world has experienced its share of challenges, including volatility in the value of its digital products.

Bitcoin, for instance, surged to a high of more than $64,000 per coin in Nov. 2021, then crashed to about $16,500 a year later. On Nov. 24 , it climbed back to about $34,500.

But there have been other impediments to wider acceptance, including fraud.

The U.S. case involving cryptocurrency banker Sam Bankman-Fried, who ran a digital currency trading platform called FTX, has received widespread publicity, while others have not.

Bankman-Fried was found guilty on seven counts of fraud in the loss of $8.9 billion on Nov. 2. Less publicized: A $300 million case in China, nine cases involving more than $2 billion recently cited by the U.S. Department of Justice, and a $127.8 million fraud case in Hong Kong.

From Bulgaria to Estonia, the list of misdeeds is long, with North Korea, the U.S., Russia, China and the U.K. recording the most criminal activity in the digital currency world.

Sometimes the crime hits home.

BIT Mining’s Akron location reported a cyberattack that occurred on Dec. 3, 2022.

In the attack, the company said, $700,000 of bitcoin was stolen from BIT Mining clients and $2.3 million from the company.

The theft, BIT Mining said, was reported to authorities In Shenzhen, China, and some assets were recovered.

Volatility remains an issue with cryptocurrency

Nicholas Glenn, an assistant professor in the University of Akron Economics Department, said the problem cryptocurrency miners, investors and users will have to overcome is the fluctuating value of bitcoin.

“The big issue for bitcoin is, in the short term, it’s really volatile,” he said. “In the long term, it may become more stable.”

Glenn is more skeptical than Pelleg about the mid-term prospects of cryptocurrency, and bitcoin in particular.

“As of now, the way it’s set up it is not good for a day-to-day currency,” he said. “It’s not ever going to replace a good currency.”

Leave a message for Alan Ashworth at 330-996-3859 or email him at[email protected]. Follow him on Twitter at @newsalanbeaconj.

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