Two Estonian citizens have been arrested in Tallinn for plotting a $575 million cryptocurrency scam.
Two Estonians have been arrested in Tallinn, Estonia, after being charged in the US with running a fraudulent cryptocurrency Ponzi scheme that resulted in losses of over $575 million.
According to the indictment, Sergei Potapenko and Ivan Turõgin allegedly defrauded hundreds of thousands of victims through a cryptocurrency Ponzi scheme. The duo used the shell company to launder the cash from their fraudulent activities and purchase real estate and luxury cars.
“The victim was induced to enter into a fraudulent equipment leasing agreement with HashFlare, the defendant’s cryptocurrency mining service. They also induced victims to invest in a cryptocurrency bank called Polybius Bank.” reads press release Published by DoJ. “In reality, Polybius was not really a bank and never paid a promised dividend. Victims paid over $575 million to Potapenko and Turõgin’s companies.”
The defendants are accused of defrauding victims between December 2013 and August 2019 to operate with other conspirators based in Estonia, Belarus and Switzerland.
Potapenko and Turõgin tricked investors into believing that HashFlare was a massive cryptocurrency mining operation, with victims being asked to pay for rented computing power and receive a proportional share of the cryptocurrency mined. The bad news for investors is that there is no virtual currency mining rig that HashFlare claims to have.
According to the indictment, HashFlare’s rig performed bitcoin mining at less than 1% of its claimed computing power.
When investors asked them to withdraw their mining proceeds, the defendants either refused to pay or, in some cases, paid the investors using virtual currency purchased on the open market.
HashFlare ceased operations in 2019, but in May 2017, it began offering investments in a company called Polybius, which claims to establish a bank specializing in cryptocurrency.
“They promised investors dividends from Polybius’ earnings. The men raised at least $25 million in the scheme and transferred most of the money to other bank accounts and cryptocurrency wallets they controlled. Polybius has never established a bank or paid a dividend.” DoJ continues.
According to the indictment, the defendants also conspired with shell companies to launder the proceeds of their crimes through false contracts and invoices. The money laundering conspiracy involved “at least 75 properties, six luxury vehicles, cryptocurrency wallets and thousands of cryptocurrency mining machines.”
Potapenjo and Turõgin were charged with wire fraud, 16 counts of wire fraud, and one count of conspiracy to launder money. Both face up to 20 years in prison.
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(security work – hacking, cryptocurrency fraud methods)
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