Two Estonians arrested over $575m fraud

The two suspects ran a bogus crypto mining service and used investor money to maintain a luxurious lifestyle.

Two Estonians have been arrested and charged in connection with a cryptocurrency fraud and money laundering scheme.

The scheme itself is estimated at $575m worth of cryptocurrency holdings according to US prosecutors.

The accused, Sergei Potapenko and Ivan Turõgin, are alleged to have taken advantage of thousands of victims, the US Department of Justice (DoJ) said through their bogus crypto mining service HashFlare.

Victims were asked to invest in fraudulent crypto mining equipment and place money with Polybius Bank, which was advertised as a virtual bank, but was not.

The arrests were carried out in Tallinn, the capital, and are the latest proof that law enforcement in the US has a global reach when it comes to going after crypto criminals.

Commenting on the arrest, assistant attorney general Kenneth Polite spoke about the challenges that law enforcement and consumers had to address.

“New technology has made it easier for bad actors to take advantage of innocent victims — both in the US and abroad — in increasingly complex scams”, Polite explained.

The HashFlare operated between 2015 and 2019 during which contracts worth $550m were signed. However, none of these contracts were in fact real, the DoJ specified.

The company did not have the mining equipment they alleged to have, and once consumers attempted withdrawing their funds, they were denied. The duo did not wish to pay investors back and in the rare cases it did, it had done so through obtaining tokens from the market instead.

Potapenko and Turõgin are now being charged with 16 counts of wire fraud, conspiracy to commit wire fraud, conspiracy to commit money laundering, and more.

The ill-gained investor funds had allowed the men to live in luxury, having acquired 75 real estate properties, several luxury vehicles, and more.

Both men face a maximum of 20 years in prison if found guilty. The size of the crime they committed was “truly outstanding”, said Nick Brown, US attorney for the western district of Washington.

DoJ and US prosecutors have had a number of successes against crypto criminals in recent months, having successfully convicted from one James Zhong connected to the Silk Road dark web marketplace.

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Written by Alex


Alex is a well-rounded crypto writer who focuses on general market and legal developments. His main interest lies in how crypto gaming can become a more permanent part of the gaming landscape and how blockchain holds benefits to players they are not even aware of.

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