- Estonian police arrested two men accused of running a $575 million crypto money laundering scam.
- The duo allegedly defrauded hundreds of thousands of investors and used the money to buy luxuries.
- The criminal indictment comes as Bitcoin just hit a two-year low and crypto scams abound.
Estonian police arrested two 37-year-olds accused of running a $575 million crypto money laundering scam. The Estonian citizens face multiple criminal charges including fraud and conspiracy to commit money laundering, and are detained in Estonia’s capital while extradition to the United States is pending, according to a Department of Justice (DOJ) release on Monday.
Sergei Potapenko and Ivan Turõgin are accused of reeling in hundreds of thousands of people across the globe to invest in their purported bitcoin mining service HashFlare from 2015 to 2019, the release states. The two men allegedly funneled the money through shell companies and spent it on “real estate and luxury cars,” according to the release.
They’re also accused of defrauding $25 million’s worth of investors’ money in a “virtual currency” bank called Polybius they said they created, although they allegedly never created the bank or paid dividends to said investors.
The DOJ release states that HashFlare didn’t have the cryptocurrency mining equipment it claimed, and was performing the process of Bitcoin mining “at a rate of less than one percent” of its purported computing power.
“The size and scope of the alleged scheme is truly astounding,” US Attorney Nick Brown of the Western District of Washington said of the scam, the DOJ release says. “These defendants capitalized on both the allure of cryptocurrency, and the mystery surrounding cryptocurrency mining, to commit an enormous Ponzi scheme”
The criminal indictment comes at a rocky moment for crypto and virtual currency, when the industry has seen a dramatic downturn and scams abound. Earlier this year, dozens of investors lost thousands of dollars when the huge algorithmic stablecoin TerraUSD suddenly crashed. Bitcoin sank to a two-year low this week as the market grappled with the explosive collapse of FTX, the second-largest crypto exchange company in the world that recently filed for bankruptcy after its founder secretly transferred $10 billion in customer funds to an affiliated company.
