Two Estonians Arrested For Allegedly Orchestrating A Crypto Scam Worth $575 Million
Two Estonians arrested for allegedly orchestrating a crypto scam worth $575 million. They were arrested in the capital city of Tallinn by the Estonian for their roles in a "enormous" Ponzi scheme that scammed cryptocurrency investors.
The investigation into the case was conducted jointly by the Estonian police and the FBI. The United States now wants to extradite Sergei Potapenko and Ivan Turgin, both of whom are 37 years old, because they are accused of defrauding hundreds of thousands of investors in two different schemes between 2015 and 2019.
The US Department of Justice (DoJ) said in a statement that the two are charged with wire fraud and conspiracy to launder money, which are crimes that can get you up to 20 years in prison. According to the statement, the defendants have appeared in court in the Estonian capital Tallinn, but there was no immediate comment from their representatives.
The two men are accused of encouraging others to make financial investments in a bitcoin mining business known as HashFlare. They let individuals know that in exchange for the virtual cash that was produced by the company's cryptocurrency mining operations, they could rent out a portion of those operations to them.
The production of virtual currency for financial gain through the use of computers is known as crypto mining. This process requires a substantial amount of processing power.
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According to reports, people have invested more than $550 million in the business over the course of the last four years. It has been alleged that the company's equipment only mined Bitcoin at a pace that was less than 1% of the computational power it said it possessed. However, HashFlare's website gave the impression that they were making a lot of money despite the fact that it appeared to be false
According to the Department of Justice, when investors wanted to get their money back, the two either said no or paid them with virtual currency that they bought on the open market instead of returning the investors' original investment.
It has been reported that the two began a second plan in 2017 with the intention of stealing money from investors. This time, it was a financial institution that specialized in digital money that was hacked. They predicted that investors would receive returns on their investments in the form of dividends from the earnings made from the virtual currency.
People had the impression that Potapenko and Turgin were able to raise $25 million for a fictional bank called Polybius, although this bank did not actually exist.
In both of the schemes, it is believed that the two individuals laundered money by using "shell companies and fake contracts and invoices" to purchase at least 75 properties, six luxury vehicles, cryptocurrency wallets, and thousands of cryptocurrency mining machines.
Potapenko and Turgin are accused of hatching a conspiracy to launder money, committing 16 separate counts of wire fraud, and conspiring to commit other acts of wire fraud. If proven guilty, each individual faces the possibility of serving up to 20 years in prison.
According to said US Attorney Nick Brown:
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. They lured investors with false representations and then paid early investors off with money from those who invested later. They tried to hide their ill-gotten gains in Estonian properties, luxury cars and bank accounts and virtual currency wallets around the world. US and Estonian authorities are working to seize and restrain these assets and take the profit out of these crimes.
- US Attorney Nick Brown
Oskar Gross of Estonia's cybercrime bureau said that the joint investigation, in which 100 people were involved, including 15 from the United States, was "long and vast."
It was "one of the largest fraud cases we've ever had in Estonia," he said on Monday, as quoted by Estonia's ERR news agency.
The governing bodies of the nation stated that modern technology has "increased the possibility of fraud" and made it simpler for individuals to deceive others.
This case comes at a time when the cryptocurrency market is highly tense as a result of the failure of FTX, which was the world's second-largest cryptocurrency exchange.
According to a document submitted to the court, the corporation initiated bankruptcy proceedings in the United States last week and owes its 50 largest creditors a total of over $3.1 billion (£2.6 billion).