European AI cloud company secured tax breaks on NVIDIA AI GPUs, used them for crypto mining

A criminal investigation that saw raids of a European AI cloud company is focusing on whether the company used its $586 million worth of NVIDIA AI GPUs for crypto mining, after getting massive tax breaks on the funds to buy those AI chips.

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In a new report from Bloomberg, the report says that European prosecutors are looking into Northern Data and its purchase of GPUs for its site in northern Sweden. Authorities are investigating whether Northern Data, which is backed by stablecoin issuer Tether Holdings SA, obtained a tax break by claiming that the AI chips were being used for AI, when instead they were being used for cryptocurrency mining.

A few years ago, Sweden embraced the idea of cryptocurrency mining, but turned that idea around in 2023 and removed tax incentives for companies that were establishing mining operations, leaving them in place for data centers. After that, Swedish tax authorities have been investigating several crypto miners for allegedly providing misleading information to benefit from tax incentives, according to sources of Bloomberg.

A Northern Data spokesperson said: "Northern Data believes there is a misunderstanding of tax treatment of its GPU offering, which is solely dedicated for cloud computing, and the economic and legal structure of the company's legacy crypto mining operations". There has been a senior Northern Data employee in Sweden that was also interrogated.

This particular case is looking into three of Northern Data's subsidiaries in Sweden between the years of 2021 and 2024, with investigators probing into the subsidiaries of tax crimes and money laundering, explains Jerker Asplung, a delegated prosecutor for EPPO.

This isn't the first time that Northern Data has used NVIDIA AI GPUs for crypto mining, where the firm used the AI chips for crypto mining Ether until the token's blockchain went through its massive software update back in 2022 that rendered the chips unnecessary for that purpose. In 2023, the company spent about €400 million on buying 10,000 of NVIDIA's H100 AI GPUs to expand its European AI offering.

Northern Data is majority-owned by Tether, which also invested in Rumble, with last month seeing Bloomberg report that Rumble was considering an offer to acquire Northern Data in an all-stock deal that would put its value at around $1.17 billion. Tether is also in discussions with investors to raise around $20 billion in a deal that would push the crypto firm into the highest ranks of the world's most valuable private companies.

A spokesperson for Tether said: "Tether is not involved in the day-to-day management of this company and was not aware of any such investigations prior to these reports. This company is a small part of our overall portfolio of investments and has no impact or bearing on Tether's business or operations".