According to a news release issued by the U.S. Department of Justice (DOJ) on November 21st, two Estonian individuals were detained in Tallinn after being accused of taking part in a $575 million cryptocurrency fraud and money laundering operation.
Through their cryptocurrency mining business, Hashflare, Sergei Potapenko, and Ivan Turgin reportedly scammed hundreds of thousands of customers by tricking them into signing false equipment leasing contracts.
A bogus bank called Polybius Bank was also established by them. The profits promised to people who invested in this company were never actually paid because the company was never legal.
“Victims paid Potapenko and Turgin’s companies more than $575 million.” After laundering the money, they used phony firms to purchase pricey homes, automobiles, and other stuff for themselves.
According to Kenneth A. Polite, Jr., an associate attorney general in the Criminal Division of the Justice Department, new technology has made it easier for dishonest actors to exploit innocent people both domestically and abroad by deploying increasingly complex frauds.
He claims that the department will not let these con artists get away unpunished and will do all in its power to stop the public from being taken advantage of in the future.
Both Estonian Runs “Astounding” Crypto Fraud Scheme
U.S. Attorney Nick Brown for the Western District of Washington said:
The size and scope of the alleged scheme is truly astounding. These defendants capitalized on both the allure of cryptocurrency, and the mystery surrounding cryptocurrency mining, to commit an enormous Ponzi scheme.
The indictment alleges that both of the defendants claimed that HashFlare was a major cryptocurrency mining operation. To compensate them, they sold contracts that allowed customers to buy a portion of the company’s mining power in exchange for the profits generated from their rented share.
Customers may view the quantity of virtual cash that their mining activity was said to have produced on the HashFlare website. Between 2015 and 2019, HashFlare contracts totaled more than $550 million, with customers from all around the world, including western Washington.
When investors demanded access to their mining funds, they couldn’t meet the demands. They either resisted providing a payout or just repaid them using virtual currencies they’d purchased on the open market – not ones they’d mined themselves.
The defendants established Polybius in 2017 and raised $25 million, which they transferred to various bank accounts and cryptocurrency wallets they owned.
In addition, hundreds of bitcoin mining devices, six luxury cars, at least 75 real estate assets, and cryptocurrency wallets were reportedly used in the money laundering scheme.
According to the news release, Potapenko and Turõgin are both accused of conspiring to conduct wire fraud, as well as 16 counts of wire fraud and one count of conspiring to launder money.
Both of them will receive up to 20 years in prison if they are found guilty. The U.S. Sentencing Guidelines and other statutory considerations will also be considered when a federal district court judge decides on a sentence.
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