The case occurs at a time when there is increased scrutiny of crypto mining’s energy consumption.
The United States Department of Justice (DOJ) has charged two senior staff members of the Patterson Joint Unified School District for allegedly operating a cryptocurrency mining operation on the campuses of the district’s 10 schools, using school resources and driving up electricity costs.
In a recent statement, the DOJ claimed that Patterson Joint Unified School District Assistant Superintendent and Chief Business Officer Jeffrey Menge, along with the school district’s IT Director, Eric Drabert, worked together to operate a cryptocurrency mining farm, pocketing the profits.
However, the statement did not provide clarity on how many schools in the district were used for the cryptocurrency mining operation, which comprises 10 schools serving about 6,200 students. Furthermore, the type of cryptocurrency mined was not revealed.
Some of the most commonly mined cryptocurrencies include Bitcoin, Monero, Ravencoin, and Dogecoin. According to recent data from CoinGecko, mining a single Bitcoin as an individual miner requires approximately 266,000 kilowatt-hours of electricity. This would take approximately seven years, with a monthly electricity consumption of 143 kWh.
Crypto: Energy Concerns and Global Scrutiny
The case comes amid the US energy regulator’s recent crackdown on cryptocurrency miners as part of an initiative to reduce energy waste in the nation. The US Department of Energy (DOE) recently required mandatory reporting on energy use by crypto miners for six months, citing concerns about rising Bitcoin prices and an influx of mining activity.
Additionally, the US Energy Information Administration (EIA) launched a survey to measure the electricity usage of local crypto mining companies.
This is not just a concern within the United States, as regulators around the world are making efforts to control excessive electricity consumption. For example, Indonesian authorities shutting down illegal Bitcoin mining operations in December 2023.
The DOE reporting mandate aims to increase transparency and accountability within of the crypto mining industry. This data can inform policy decisions and ensure responsible management of resources, mitigating potential environmental and financial damage.
Further Investigation Needed
While the Department of Justice alleges that Menge embezzled between $1 million and $1.5 million and Drabert stole between $250,000 and $300,000, further investigation is crucial to fully understand the details and scope of their alleged activities.
The charges against Menge and Drabert involve billing manipulation within the school district through a company controlled by Menge called CenCal Tech. Using a fictitious executive named Frank Barnes, the duo conducted “fraudulent transactions totaling more than $1.2 million” by engaging in practices such as double billing, overbilling, and billing for items that CenCal Tech never provided to the school district.
According to a statement, Assistant U.S. Attorney Jeffrey A. Spivak is prosecuting the case, while the FBI is leading the investigation, with assistance from the Stanislaus County Sheriff’s Office and the U.S. Attorney’s Office of Investigation. District. U.S. District Judge Troy L. Nunley will preside over sentencing on May 30, 2024.
Each defendant faces a maximum statutory sentence of 10 years in prison and a fine of $250,000. However, the court will be free to determine actual sentences after taking into account legal requirements and the Federal Sentencing Guidelines.
This case highlights broader ethical and environmental issues surrounding cryptocurrency mining. While the technology offers potential benefits, concerns about energy consumption, the possibility of illegal activities, and the potential misuse of public resources require careful consideration and responsible regulation.
By Audy Castaneda