SEATTLE – Two Estonians have been arrested and charged for a large $575 million cryptocurrency scam that reached so far as Western Washington.
According to the U.S. District Court in Seattle, 37-year-olds Sergei Potapenko and Ivan Turõgin each face an 18-count indictment for conspiracy, wire fraud and conspiracy to commit cash laundering. Both males have been arrested in Tallinn, Estonia on Nov. 20, and are presently pending extradition to the U.S.
U.S. Attorney Nick Brown alleges the 2 ran a “crypto mining” operation that scammed buyers out of greater than half a billion {dollars} between 2015–2019.
“The dimension and scope of the alleged scheme is really astounding. These defendants capitalized on each the attract of cryptocurrency, and the thriller surrounding cryptocurrency mining, to commit an unlimited Ponzi scheme,” mentioned Brown. “They lured buyers with false representations after which paid early buyers off with cash from those that invested later. They tried to cover their ill-gotten acquire in Estonian properties, luxurious vehicles, and financial institution accounts and digital foreign money wallets all over the world. U.S. and Estonian authorities are working to grab and restrain these belongings and take the revenue out of those crimes.”
According to the indictment, Potapenko and Turõgin operated a crypto mining enterprise referred to as HashFlare. Crypto mining is the method of utilizing computer systems to generate cryptocurrency like Bitcoin.
The two supplied contracts the place clients would pay a price to lease a share of HashFlare’s mining operations, in alternate for the crypto generated by their portion. The HashFlare web site additionally allowed clients to see how a lot cryptocurrency their mining had generated.
In actuality, the courtroom mentioned HashFlare had lower than 1% of the computing energy they claimed to have.
Instead, their earnings got here from early buyers, and as extra buyers got here into the fold, Potapenko and Turõgin would pay the early buyers with the later buyers’ cash. Then, when buyers tried to withdraw their earnings, they resisted or, in some circumstances, pay them off with foreign money purchased on the open market—slightly than what that they had supposedly mined.
Potapenko and Turõgin in 2017 supplied investments in the corporate Polybius, which reportedly positioned itself as a financial institution specializing in digital foreign money. The two promised to pay buyers dividends from Polybius’ earnings, Brown mentioned.
Polybius by no means shaped a financial institution or paid any dividends.
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According to the indictment, the 2 laundered some $25 million in investments via shell firms, phony contracts and invoices, utilizing the cash to purchase actual property and luxurious vehicles.
“New know-how has made it simpler for dangerous actors to benefit from harmless victims—each in the U.S. and overseas—in more and more advanced scams,” mentioned Assistant Attorney General Kenneth A. Polite, Jr. “The division is dedicated to stopping the general public from shedding extra of their hard-earned cash to those scams and won’t enable these defendants, or others like them, to maintain the fruits of their crimes.”
Potapenko and Turõgin each appeared in courtroom in Tallinn. Each of their crimes is punishable by as much as 20 years in jail, the courtroom mentioned.
If you or somebody you realize believes you have been scammed by HashFlare, you might be inspired to go to the (*2*).
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