Vasily Sumanov


What is actually behind Cloud Mining services?

What is Actually Behind Cloud Mining Services?

Results of a little investigation

Image from

Last two months were exceptionally bullish for BTC that recently hit 2019 high of $13k on Wednesday, 26 June. According to Google Trends data, bitcoin-related search queries tripled since March and the number of daily active addresses hit 1 million, which is comparable with the end of 2017.

The majority of influencers and traders support the version that crypto-winter is over and the market finally entered a bullish phase, while steps in regulation provide optimism regarding maturing of relatively young digital assets market.

Investment funds representatives see an additional price growth opportunity in upcoming Bitcoin halving, that would significantly reduce the supply of coins to the market.

Newcomers to the cryptocurrency industry usually start to explore possibilities to mine Bitcoins and other digital currencies driven by various reasons, the major one is FOMO.

Discovering that buying, launching, and support operation of mining hardware is a rather complex task, crypto-enthusiasts draw attention to cloud mining services that offer to buy hashing power remotely. Such an approach looks like an easy way to obtain Bitcoins as no other attempts from the end-user are required.

However, people usually associate cloud mining services with SCAM since a lot of such services cheated their clients and stole money. Seems that this problem is really huge: even SEC intervened one case and officially indicted GAW Miners CEO for ‘Hashlet’ Ponzi Scheme. In this article, we investigated cloud mining services to answer the question: could a fair cloud mining service exist?

For this purpose, we studied public information regarding seven cloud mining companies. The main points of research were business transparency (proof of hashing power, customer support) and trustworthy and reputation of a legal entity behind the service.

The table from my original document


Website of this service catches the attention of the potential customer by a professional-grade video with girls and champaign which doesn’t look like a business presentation but seems to be a report on a private party on a mining farm.

The key moments regarding mining process, that are in focus of any mining engineer (observation of data center, equipment layout) almost missed. But, assuming that the main aim of this video is just to impress newcomers in crypto space, it all makes sense.

The company made a statement that currently operates ~20 megawatts of mining hardware, but verify it (at least on a basis of information from this website) is impossible.

However, it is possible to check the performance of a legal entity thanks to the public registry of the UK companies. The legal entity of the Cryptouniverse, MIOTECH IMPEX LP was created by two partners — Lajos Balog and Eva Bondar. How they are related to this cloud mining service? Further research has shown that they are just nominee persons in this company as well as in a lot of others.

According to Endole, Eva Bondar is involved in at least fifteen completely different companies, Balog acts as a partner. The registration address is used by 1640 companies. According to all facts, mentioned above MIOTECH IMPLEX LP is an ordinary shell company. Probably, the balance of the company is zero (but these data wasn’t uploaded to the registry). Is Cryptouniverse a scam project? We don’t know exactly. However, all the mentioned facts possess a lot of questions to this company. For example, who will be responsible if Cryptouniverse one day stops to withdrawing money according to customers requests?

Virtual Mining Farm

Virtual Mining Farm offers unusual bitcoin mining approach to its customers: instead of selling the hashing power this service collects “bitcoin deposits”. This website claims that it is “Proof-of-Stake”-like mechanics where staked coins participate in consensus and mining new coins. Of course, the Bitcoin network has nothing to do with PoS consensus as it is running at Proof-of-work (PoW), so such “bitcoin staking” offer is an evident deception.

The Virtual Mining Farm website does not contain any information about mining facilities or the company behind the project. Combining all facts, it looks like an ordinary Ponzi scheme. Evidently, the target audience of this project is newcomers into the cryptocurrency industry — easy to fool users. No doubts that the service itself is a scam.

CCG Mining

The CCG Mining website claims that the project has own mining facilities as well as offices in six counties and respectable UK company behind. Moreover, there is a statement: choose a reliable partner. Of course, for an experienced customer, all this looks like an ordinary advertising trick.

We decided to verify company details and explore the history of its operation. The public registry of UK companies reveals that CCG Mining LTD registered at 85 Great Portland Street W1W 7LT London United Kingdom is dissolved. The status “dissolved” means that the company no longer is active, and its operation is terminated. By the way, this address is used for another 5698 companies so evidently, no real office is there. Thus there is not even a shell company behind. Is this a scam? Let the reader answer this question himself.

Genesis Mining

Genesis Mining seems to be one of the oldest cloud mining services. The company is registered in the offshore zone — British Virgin Islands (BVI), so in case of a problem, it will be not easy to solve it using a court or other legal mechanisms. A lot of negative reviews can be found on the Internet, including one-sided contract termination, surprisingly high fees and many more. Of course, it is impossible to check out all these reviews, but information background around the company is definitely negative (in terms of independent opinions).


First publications regarding the activity of this company in media come back to 2015. At 2018 company finished business activities (as well as withdrawal of funds), but the website still works and attracts new customers. However, a lot of SCAM alerts and negative reviews can be found on the Internet there mostly regarding the refusal of money withdrawal under different reasons. The Reddit users even considered going to the court to oblige the UK company behind the project to return the money. However, how much money you can get from the company with 2 GBP of authorized capital registered on the nominees from Dominicana, which are “working” as directors of many similar shell-like companies?


The ECOS company is relatively new to the market and is registered in a rather exotic jurisdiction — Armenia. All appearances that it is connected with the fact that the Armenian government recently launched the special economic zone for the blockchain companies. We made a little research and found the publication and government-issued document, which appoints ECOS as an official company-operator of this zone. According to information found in media, this company performs a fully-compliant mining activity with (surprisingly!) zero taxation and decreased other costs. The public statement shared by the project creators claims that the combination of several specific conditions allowed to built mining project that is profitable on this unstable market. Seems that it is the first mining project controlled by the government operating in the especially created economic zone. Looks like a smart plan — when others are hiding their identity and taxes in shell companies, these guys went all-in in transparency and optimized conditions for the comfortable operation.


MyCoinCloud does not publish any information regarding the legal entity behind the project. Bulgaria is mentioned as a country where the project was launched. The proof of mining equipment comes down to several mediocre photos. The reviews on the Internet are completely different and are both positive and negative. The complete absence of any information causes bewilderment — will a serious and reliable business project hide from its clients like that? Of course not.

So, where is the truth?
We found out that the majority of cloud mining companies are represented by shell companies in the UK or offshore jurisdictions registered on nominee directors.

It means that nobody is responsible for any fraud caused by such projects. A good example of such a problem was a termination of operation of the Hashflare company followed by unsuccessful attempts to return money to customers. It is surprising, but no service could provide real proof of ownership of mining equipment.

I found a free economic zone in Armenia is a really curious object for further investigation. However, it looks better than shell UK company with 2 GBP of capital registered on Dominican nominee directors. The mining industry now is like an ordinary business so any approaches to cut the costs without exposing core processes to legal or safety risks look great.

Probably, profitable mining business can exist in the form of public-private partnership as it allows to decrease taxes, provide legal and other kinds of support and make such project more trusted in the community. It is truly important since cloud mining is mainly considered as a fraud than as serious activity.

More by Vasily Sumanov

Topics of interest

More Related Stories