Federal prosecutors in the US state of Washington have arrested two Estonian citizens in a series of alleged defrauds of a total of $575 million from hundreds of thousands of investors worldwide. cryptocurrency accused of committing fraud.
Two Defendants, Estonian Citizens Wanted by US Department of Justice on Charges of $575 Million Cryptocurrency Fraud
Sergei Potapenko and Ivan Turogin, 37, both living in Tallinn, Estonia, were partners in a series of linked scam schemes using cryptocurrency, according to the indictment released Monday.
Allegedly, the two defendants used various shell companies to launder the proceeds of their schemes and spent investor funds on luxury cars and real estate in Estonia.
Their first company, HashCoins, which launched in December 2013, claimed to be a manufacturer of crypto mining equipment and was taking orders (and full payment) from customers who wanted to buy mining equipment.
However, according to the indictment, HashCoins never produced anything, instead resold mining equipment purchased on the open market and found reasons to delay shipment of most of its sales.
The Defendants Defrauded With The Second Company They Founded
In May 2015, faced with a growing number of angry customers, Potapenko and Turogin allegedly founded a second company, HashFlare. According to prosecutors, they told their clients that orders for mining equipment would be converted into “remote mining services” and promised to receive a share of the service’s profits instead of physical equipment.
But prosecutors say Potapenko and Turogin run HashFlare more like a pyramid scheme than a mining operation, accusing them of actually extracting less than 1% of all mining hashrate sold to customers.
In 2018, HashFlare, citing rising energy costs, and prosecutors Potapenko and Turogin bitcoin announced that it was closing, claiming that its mining was no longer profitable.
However, the defendants continued to mine for themselves using devices they had purchased with stolen customer funds.
Potapenko and Turogin are both charged with one time conspiracy to commit fraud, 16 counts of fraud and one time conspiracy to launder money.
Both individuals are on the run and are believed to be currently in Estonia.
*Not investment advice.
For exclusive news, analytics and on-chain data Telegram our group, twitter our account and YouTube Follow our channel now! Moreover Android and iOS Start live price tracking right now by downloading our apps!