Nov. 21 (UPI) — Two Estonian citizens were arrested on Sunday after allegedly defrauding hundreds of thousands of people in a cryptocurrency scheme.
The Justice Department unsealed indictments for Sergei Potapenko and Ivan Turõgin, both 37, for luring victims into paying more than $575 million through an elaborate plan involving bogus rental contracts, cryptocurrency mining and a fake bank.
The duo allegedly tricked victims into entering equipment rental contracts in their cryptocurrency mining service HashFlare. They also convinced victims to invest in Polybius Bank, which was not an actual bank. They then used a series of shell companies to launder the fraudulently acquired money.
“New technology has made it easier for bad actors to take advantage of innocent victims — both in the U.S. and abroad — in increasingly complex scams,” said Assistant Attorney General Kenneth A. Polite Jr.
HashFlare allegedly misled investors about the cryptocurrency mining equipment it possessed while performing mining operations at a far less effective rate. Potapenko and Turõgin then failed to make payments to investors. The investors entered the fraudulent contracts with HashFlare between 2015 and 2019.
Potapenko and Turõgin began offering investments into Polybius Bank in 2017, which they claimed would pay dividends on its profits. They generated $25 million despite the bank being nonexistent.
The two men are charged with one count of wire fraud, 16 counts of conspiracy to commit wire fraud and one count of committing money laundering. They face 20 years in prison if convicted.
“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,” said U.S. Attorney Nick Brown.
The Estonian residents were arrested in their hometown of Tallinn. The case is being investigated by the FBI.
