2 Estonian Citizens Arrested in $575M Cryptocurrency Fraud SchemeSecurity Affairs
Two Estonian citizens have been arrested in Tallinn for allegedly leading a $575 million cryptocurrency fraud scheme.
Two Estonian nationals have been arrested in Tallinn, Estonia, after being charged in the United States for running a fraudulent cryptocurrency Ponzi scheme that caused over $575 million in losses.
According to the indictment, Sergei Potapenko and Ivan Turõgin, both 37, allegedly defrauded hundreds of thousands of victims through a crypto Ponzi scheme. The duo used shell companies to launder money from fraudulent activity and to buy real estate and luxury cars.
“They tricked the victims into entering into fraudulent equipment rental contracts with the defendants’ cryptocurrency mining service called HashFlare. They also tricked the victims into investing in a virtual currency bank called Polybius Bank. read it Press release published by DoJ. “In reality, Polybe was never a bank and never paid the promised dividends. The victims paid more than $575 million to Potapenko and Turõgin’s companies.
The defendants are accused of having defrauded the victims between December 2013 and August 2019, they operated with other accomplices residing in Estonia, Belarus and Switzerland.
Potapenko and Turõgin tricked investors into believing that HashFlare was a massive cryptocurrency mining operation, the victims were asked to pay for the rent computing power and to receive a proportionate part of the mined cryptocurrencies. The bad news for investors is that HashFlare did not have the virtual currency mining equipment it claimed to have.
According to the indictment, HashFlare’s equipment mined Bitcoin at a rate of less than one percent of the computing power it claimed to have.
When the investors demanded to withdraw their mining proceeds, the defendants either refused to make the payments or in some cases paid the investors using virtual currency purchased on the open market.
HashFlare went out of business in 2019, but since May 2017 the duo began offering investments in a company called Polybius, which they claimed was a bank specializing in virtual currency.
“They promised to pay investors dividends from Polybe’s profits. The men raised at least $25 million in the scheme and moved most of the money to other bank accounts and virtual currency wallets they controlled. Polybius never formed a bank or paid dividends. continues the DoJ.
According to the indictment, the defendants also conspired to launder their criminal proceeds through shell companies and false contracts and invoices. The money laundering plot involved “at least 75 properties, six luxury vehicles, cryptocurrency wallets and thousands of cryptocurrency mining machines.”
Potapenjo and Turõgin are charged with conspiracy to commit wire fraud, 16 counts of wire fraud and one count of conspiracy to launder money. Both could face a maximum sentence of 20 years in prison.
(Security cases – hacking, cryptocurrency fraud scheme)