Ivan Turõgin and Sergei Potapenko are accused of defrauding hundreds of thousands of victims. The defendants allegedly induced victims to enter into rental contracts for fraudulent equipment with the men’s crypto mining service HashFlare. They also are accused of soliciting investments in a virtual currency bank called Polybius Bank, which, prosecutors said, was neither a bank nor paid dividends that were promised.
The arrests of both men, aged 37, are the latest indication that law enforcement agencies are becoming increasingly focused on illicit crypto activity across the globe. The arrests in Tallinn, Estonia, also come amid the collapse into bankruptcy of FTX, a once-marquee crypto platform controlled by Sam Bankman-Fried, who at his height of influence was considered one of the crypto industry’s flag bearers.
The indictment against Potapenko and Turõgin claims both men portrayed HashFlare as a massive crypto mining operation. Between 2015 and 2019, more than $550mn worth of HashFlare contracts were established with customers from around the world. But those contracts were fraudulent, prosecutors have alleged.
HashFlare allegedly did not have the virtual currency mining equipment it was claimed to have, and when faced with investors seeking to withdraw funds both Potapenko and Turõgin resisted making payments, or paid off investors with crypto from the open market rather than crypto tokens that had been mined at HashFlare, according to the indictment.
The indictment charges both men with conspiracy to commit wire fraud, 16 counts of wire fraud, and one count of conspiracy to commit money laundering. Their money laundering conspiracy allegedly involved at least 75 real properties, luxury vehicles, crypto wallets and mining machines, prosecutors said. If convicted both men face a potential maximum penalty of 20 years in prison.
Nick Brown, US attorney for the western district of Washington, said that "These defendants capitalized on both the allure of cryptocurrency, and the mystery surrounding cryptocurrency mining, to commit an enormous Ponzi scheme.”
U.S. and Estonian authorities are working to confiscate properties and bank accounts maintained by the defendants, Brown said.
