Two Estonians defrauded hundreds of thousands of crypto investors, earning $575 million, according to the US Department of Justice.
According to the statement, the two names used the proceeds to launder their money and buy luxury cars and real estate in Estonia.
Fraud Charge from the US Department of Justice
Sergei Potapenko and Ivan Turogin, who live in Tallinn, Estonia, collaborated in a fraud scheme using cryptocurrencies, according to the indictment prepared by federal prosecutors. The two defendants allegedly used various shell companies to launder their proceeds and investor funds were allegedly spent on purchasing luxury cars and real estate in Estonia.
The duo’s first company, HashCoins, which was founded in December 2013, claimed to be a manufacturer of crypto mining equipment and received orders from customers willing to purchase mining devices. According to the indictment, Hashcoins never produced mining devices and instead resold the devices they purchased. Due to this policy of the company, shipments were delayed and there was intense reaction from customers. For this reason, Potapenko and Turogin founded a second company, HashFlare, in 2015, and various assurances were given to customers whose orders were not delivered before. According to prosecutors, HashFlare operated more like a ponzi scheme than a mining operation, and its customers were shown information containing fake crypto balances.
While HashFlare continues to operate, Potapenko and Turogin have allegedly started another venture called Polybius Bank, which is marketed as an Estonian-based cryptocurrency bank. According to the indictment, the project held an ICO in June 2017 that raised $25 million from investors around the world for the project. The project was soon canceled.
In 2018, HashFlare announced that it was shutting down, claiming that Bitcoin mining was no longer profitable. The official closure of the project took place in August 2019. Federal prosecutors affiliated with the US Department of Justice stated that HashFlare has raised $550 million.
Potapenko and Turogin face charges of electronic fraud conspiracy and money laundering conspiracy. Both names are currently on the run and are believed to be in Estonia.
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