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The operators of the cloud mining company Hashflare were arrested in Estonia over the weekend
The pair are accused of using Hashflare to steal funds and then laundering them
Hashflare operated between 2015 and 2019
Crypto fraud may never be the same again following the FTX affair, but it carries on nevertheless, as two Estonian crypto crooks can testify. Sergei Potapenko and Ivan Turõgin were arrested over the weekend on an 18-count indictment for allegedly operating a $575 million cryptocurrency fraud and money laundering conspiracy in involving the company Hashflare, which offered cloud mining contracts between 2015 and 2019 and turned out to be nothing but a ruse to steal money from unwitting customers.
Hashflare Took in $550 Million
Hashflare claimed to have a huge mining farm where people could buy short term contracts and profit from the enterprise remotely, winding down the company in 2018 and blaming the bear market for rising costs. In truth however, they had probably earned enough money, although they still sold contracts into 2019.
As well as operating the fraudulent cloud mining service, Potapenko and Turõgin also caused victims to invest in a virtual currency bank called Polybius Bank. This turned out to be equally as legitimate as Hashflare and never paid out the promised dividends, allowing the pair to pocket $575 million from the two operations, with Hashflare earning more than $550 million of this.
Potapenko and Turõgin are then alleged to have used shell companies to launder the fraud proceeds, as well as purchasing real estate and luxury cars. Potapenko and Turõgin’s mistake may have been involving victims from the U.S., which allowed the FBI to start an investigation.
Pair Will Face Extradition and 20 Years in Prison
Working with Estonian police, the FBI was able to trace the flow of money from the scam and locate the pair, who were both arrested on Sunday after a grand jury returned a verdict that there was enough grounds to charge them with conspiracy to commit wire fraud, 16 counts of wire fraud, and one count of conspiracy to commit money laundering.
Potapenko and Turõgin will now face extradition to the U.S. to stand trial, where each will face a maximum penalty of 20 years in prison.
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