Two Estonian citizens have been arrested and charged in connection with what US prosecutors described as a $575 million cryptocurrency fraud and money laundering scheme.
Sergey Potapenko and Ivan Turogin are accused of defrauding hundreds of thousands of victims, according to the US Department of Justice, which released an indictment against them on Monday.
The defendants allegedly lured victims into signing contracts for renting illegal equipment at HashFlare, a cryptocurrency mining service for men. They are also accused of soliciting investments in a cryptocurrency bank called Polybius Bank. Prosecutors said Polybius Bank was not a bank and the promised dividends were not paid.
The arrests of both 37-year-old men are the latest sign that law enforcement agencies are increasingly paying attention to illegal cryptocurrency activities around the world. The arrest in Tallinn, Estonia comes after FTX, a formerly marquee cryptocurrency platform managed by Sam Bankman-Fried, who was considered one of the crypto industry’s bannermen at the height of his influence. It was also in the midst of being forced into bankruptcy.
“New technology makes it easier for bad actors to take advantage of innocent victims in increasingly complex scams, both in the U.S. and abroad,” said Assistant Attorney General Kenneth Polite. said.
Earlier this month, the United States won the conviction of James Zong, who once held $3 billion worth of bitcoin stolen from the Silk Road, a notorious darknet marketplace that accepts cryptocurrencies in exchange for illicit goods. I was.
The indictment against Potapenko and Turõgin alleges that both men portrayed HashFlare as a large-scale crypto mining operation. Between 2015 and his 2019, over $550 million in HashFlare contracts were established with customers around the world. However, prosecutors allege these contracts were fraudulent.
HashFlare allegedly did not have a cryptocurrency mining facility, and when faced with investors trying to withdraw their funds, both Potapenko and Turõgin resisted paying or previously from the public market rather than crypto tokens. and paid investors in virtual currency. It was mined at Hashflare, according to the indictment.
The indictment charges the two men with conspiracy to commit wire fraud, 16 counts of wire fraud, and one count of conspiracy to commit money laundering. His money laundering conspiracy involved at least 75 properties, luxury cars, cryptocurrency wallets and his mining machines, prosecutors said. If convicted, the two face up to 20 years in prison.
Nick Brown, U.S. Attorney for the Western District of Washington, where the lawsuit was filed, said the size and scope of the alleged scheme was “genuinely outstanding” and defendants “explained both the fascination of cryptocurrencies and the mysteries surrounding them.” provided funding to the Cryptocurrency mining to run giant Ponzi schemes”.
The indictment was remanded by a grand jury on Oct. 27 and opened Monday.