The Estonian duo set up fraudulent crypto mining service HashFlare and crypto bank Polybius Bank, stealing over half a billion dollars from their victims.
Estonian citizens Sergei Potapenko and Ivan Turõgin, both aged 37, were arrested in Tallinn for alleged involvement in a global crypto fraud worth a staggering $575m.
According to the US Department of Justice (DoJ), Potapenko and Turõgin defrauded hundreds of thousands of victims around the globe through a multi-faceted scheme.
“They induced victims to enter into fraudulent equipment rental contracts with the defendants’ cryptocurrency mining service called HashFlare. They also caused victims to invest in a virtual currency bank called Polybius Bank. In reality, Polybius was never actually a bank, and never paid out the promised dividends,” the DoJ said in a statement.
Potapenko and Turõgin built an enormous Ponzi scheme, paying early investors off with money from those who invested later, the DoJ claims.
The fake crypto mining business, HashFlare, has continued issuing false contracts to victims since 2015. The suspects offered customers to rent HashFlare’s crypto mining equipment for a fee. The service’s website presented users with the amount of virtual currency their mining activity supposedly generated.
“HashFlare allegedly did not have the virtual currency mining equipment it claimed to have. HashFlare’s equipment allegedly performed Bitcoin mining at a rate of less than one percent of the computing power it purported to have,” the DoJ said.
Once pressed to pay out the funds to victims, the suspects would either refuse to do so or send victims crypto bought online, not mined using HashFlare.
The fraudulent crypto mining contracts netted Potapenko and Turõgin $550m from 2015 until 2019, prompting the duo to spend the stolen funds on luxury cars and real estate.
In another scheme, the suspects offered investments to Polybius, a cryptocurrency bank the duo was supposed to set up. The suspects netted $25m worth of assets and never formed any bank or paid dividends to the investors.
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