Two Estonian Men Arrested for Alleged Role in Massive Cryptocurrency Ponzi Scheme
Two Estonian men have been arrested in the capital city of Tallinn for their alleged involvement in a Ponzi scheme that defrauded cryptocurrency investors out of hundreds of millions of dollars. Sergei Potapenko and Ivan Turõgin, both 37, are accused of defrauding hundreds of thousands of investors in two schemes that ran from 2015 to 2019.
HashFlare Scheme
One of the schemes involved the solicitation of investments in HashFlare, where investors were promised a percentage of the firm’s cryptocurrency mining operations in exchange for the virtual currency it produced. Over a four-year period, customers reportedly invested over $550 million in the firm. However, it was later discovered that the firm’s equipment was allegedly only performing Bitcoin mining at a rate of less than 1% of the computing power it claimed to have.
When investors requested to withdraw their funds, Potapenko and Turõgin either denied their requests or paid them using virtual currency purchased on the open market, according to the Department of Justice.
Polybius Bank Scheme
In 2017, the duo launched a second fraudulent investment scheme involving a virtual currency bank called Polybius, which they claimed would generate dividends for investors from its profits. They managed to raise $25 million for this fictitious bank, but investigations revealed that the bank never actually existed.
Money Laundering Allegations
In both schemes, Potapenko and Turõgin are said to have laundered funds through shell companies, phony contracts, and invoices to purchase at least 75 properties, six luxury vehicles, cryptocurrency wallets, and thousands of cryptocurrency mining machines.
Legal Charges
The two men are facing charges of conspiracy to commit wire fraud, 16 counts of wire fraud, and one count of conspiracy to commit money laundering. If found guilty, they could each face up to 20 years in prison.
US attorney Nick Brown commented on the case, stating, “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.”
Authorities from the US and Estonia are working together to seize and restrain the assets obtained through the alleged fraudulent activities, including Estonian properties, luxury cars, bank accounts, and virtual currency wallets around the world.