Estonian Pair Arrested for Running $500 Million Crypto Scam
Two 37-year-old Estonian citizens named Sergei Potapenko and Ivan Turogin have been arrested after potentially defrauding hundreds of thousands of people in an alleged crypto scheme. The money lost at the time of writing is believed to exceed $575 million.
Two Estonian Men Arrested for Crypto Fraud
The scheme involved several false rental contracts, along with a fake bank and a crypto mining facility. The pair tricked customers into engaging in equipment rental contracts with their mining service called Hash Flare. They also created a fake bank – which they called Polybius Bank – and got their investors to place money into the phony financial institution. From there, they utilized the services of several shell companies to launder the funds they received.
Assistant Attorney General Kenneth A. Polite Jr. commented in a recent statement:
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.
Polite was also there to provide commentary on a separate case of crypto fraud. This one involved a Puerto Rican man who cheated investors out of more than $110 million through a firm called Mango Markets. It is believed he manipulated the prices of various futures contracts and other assets to give traders the idea that their portfolios were doing better than they were. He is now set to face charges in a New York court.
On that case, Polite stated:
Exploiting decentralized finance platforms is the new frontier of old school financial crimes in which criminals abuse emerging technologies for their own personal gain. With this prosecution, the criminal division is sending the message that no matter the mechanism used to commit market manipulation and fraud, we will work to hold those responsible to account.
On the current crypto fraud scheme involving the Estonian pair, U.S. attorney Nick Brown mentioned:
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.
Lying to Investors?
Hash Flare is believed to have lied to its investors about the effectiveness of the equipment it used. As such, the company performed mining operations at a far less speedy rate than what was being stated. Investors then did not receive any payments that they were slated to get. This went on from about 2015 to 2019.
The couple was arrested in the Estonian capital city of Tallinn. The case is now being investigated by the Federal Bureau of Investigation (FBI). Both men are being charged with one count of wire fraud, along with 16 counts of conspiracy to commit wire fraud. They are also facing one count of committing money laundering and they are each facing 20 years in jail.
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