Two crypto scammers fooled hundreds of people in the US and across the globe into giving them millions of dollars.
“HashFlare” was a crypto mining service using sophisticated computer equipment to generate cryptocurrency like bitcoin.
This process isn’t easy, requiring specific tools and techniques to mine crypto. But, those interested in investing could buy contracts from HashFlare that would give them a share of the mined cryptocurrency.
Customers in the United States and across the world bought into HashFlare, and the company's founders made millions by selling these contracts.
“HashFlare.io offered five different types of mining contracts to the public – SHA-256 (bitcoin), ETHASH (ether), Scrypt, DASH, and ZCASH,” according to the FBI.
While those who bought the contracts were under the impression that those running HashFlare were diligently mining their share of cryptocurrency, like many promises in the crypto world, this was a scam.
The two founders of HashFlare, Sergei Potapenko and Ivan Turogin, 40, of Estonia, didn’t have the right equipment to mine cryptocurrency but sold contracts and continued to rake in funds under the guise that they did.
This scheme continued for four years between 2015 and 2019, with unsuspecting victims continuing to buy into the scheme while Potapenko and Turogin spent hundreds of thousands of that money on luxury cars and real estate.
HashFlare had a website, ‘Hashflare.io,’ which claimed to show how much cryptocurrency was being mined and, subsequently, how much money customers were making. However, this data was entirely false.
When customers potentially became suspicious and asked to withdraw funds from HashFlare, Potapenko bought bitcoin from a third party and gave it to his victims, said the FBI.
This arguably demonstrates that one perpetrator had a certain understanding of crypto trading. However, they were unable or unwilling to execute the crypto mining business.
The Department of Justice has said that 75 real properties, six luxury cars, cryptocurrency, and thousands of crypto mining machines were bought.
Out of the $577 million that was raised via the crook's three businesses (HashCoins, HashFlare.io, and Polybius), roughly $25 million was transferred directly to Potapenko and Turogin’s accounts.
Both Potapenko and Turogin pleaded guilty and had to forfeit $400 million, which should hopefully help compensate victims. Both criminals face a maximum of 20 years in prison.
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