Christopher Naples is accused of hiding 46 devices used for mining cryptocurrency in Suffolk County offices, costing the county thousands of dollars in electricity.

Jonah E. Bromwich

By Jonah E. BromwichSept. 8, 2021Updated 4:00 p.m. ET

A Long Island man was charged on Wednesday with using his position as an I.T. supervisor for Suffolk County to mine cryptocurrency from government offices, costing the county thousands of dollars in electricity.

Prosecutors said that Christopher Naples, 42, of Mattituck, L.I., had hidden 46 specialized devices used to mine Bitcoin and other cryptocurrencies in six rooms in the Suffolk County Center in Riverhead, including underneath floorboards and inside an unused electrical panel.

Mr. Naples was charged with public corruption, grand larceny, computer trespass and official misconduct. If convicted of the top charge, he could face up to 15 years in prison. A lawyer for Mr. Naples did not immediately respond to a request for comment.

“We’re talking about an enormous amount of energy,” said Timothy D. Sini, the Suffolk County district attorney, at a news conference on Wednesday, calling it a highly technical case that involved an unusual level of expertise from investigators.

Mr. Sini said that Mr. Naples had admitted that the devices belonged to him and that he had been operating them for at least several months before the district attorney’s office was alerted to the scheme.

Mining cryptocurrencies, most famously Bitcoin, is a shorthand for a complicated process that is at the heart of the difference between cryptocurrencies and traditional currencies.

While the value of traditional currencies, like dollars, is guaranteed by governments, the value of cryptocurrencies is guaranteed by its network of users. That guarantee means that every time anyone pays for anything with, for example, Bitcoin, companies and individuals compete to validate that transaction, and to enter it in the ledger that tracks every transaction made with Bitcoin.

“It’s all math,” Mr. Sini said at the news conference. “It’s math that human beings cannot do.”

The process of mining cryptocurrency requires an enormous amount of electricity to power the necessary devices: The New York Times found that the electricity expended on creating Bitcoin annually exceeds that used each year by the nation of Finland.

Prosecutors said that at least 10 of Mr. Naples’s machines had been running since February, costing Suffolk County more than $6,000. Mr. Sini said that given that 36 more machines had been discovered, it was likely that Mr. Naples had cost the county thousands more. Mr. Naples remains under investigation.

Some have argued that, by their very nature, cryptocurrencies go hand-in-hand with criminal enterprise. Janet L. Yellen, the U.S. treasury secretary, said in an interview with CNBC in February that she feared Bitcoin was often used for “illicit finance.” The technology has become a concern for state and federal regulators, given how quickly it has developed and how poorly it is understood.Sign up for the New York Today Newsletter  Each morning, get the latest on New York businesses, arts, sports, dining, style and more. Get it sent to your inbox.

Ari Redbord, the head of legal and government affairs at T.R.M. Labs, a company that investigates cryptocurrency-related crime, and a former federal prosecutor, said that the association between cryptocurrency and criminal activity had developed because the qualities that made the technology useful had made it attractive to criminals, who “also want to move funds at the speed of the internet.”

“What you often see in any new financial system really is early adoption by illicit actors who care less about things that traditional players in the financial system care about,” he said.

But he emphasized that activity connected to potential crimes made up only a small percentage of all cryptocurrency transactions, and said that new technological tools would allow investigators to track the flow of money more easily than they had been able to with traditional currencies.

The void in understanding of cryptocurrency and blockchain technology more generally has allowed for the possibility of cryptocurrency-related schemes that do not involve ransomware, terrorism or international money laundering. These are, instead, pedestrian crimes with a 21st-century twist.

In another example on Wednesday, an Ohio man, Michael Ackerman, pleaded guilty in Federal District Court in Manhattan to an investment scheme in which prosecutors said he swindled hundreds of investors out of more than $30 million, telling them he would use their money to invest in crypto.

Instead, he used at least $9 million of his investors’ funds to buy numerous pieces of real estate and hundreds of thousands of dollars of Tiffany jewelry, prosecutors said.

Mr. Naples, who has worked for Suffolk County since 2000 and whose title is assistant manager of information technology operations, was released on his own recognizance on Wednesday.

Mr. Sini said that one room in which Mr. Naples had placed the devices had critically important computer servers and other equipment for the entire county, and that the temperature in that room in which the devices were placed had dropped 20 degrees shortly after they were disabled.

“Not only do we have thousands of dollars of taxpayer money funding this operation, but it also put the county’s infrastructure at risk,” Mr. Sini said.

Mr. Naples’s use of the internet was such that other county employees had complained that service had slowed, Mr. Sini said. He also said that the county had several times called in workers to fix the air conditioning in the room in which Mr. Naples had installed the machines. SOURCE County I.T. Supervisor Mined Bitcoin at the Office, Prosecutors Say – The New York Times (nytimes.com)

By block head

Block Head is a blockchain journalist.