Two Estonian men, Sergei Potapenko and Ivan Turõgin, have recently been arrested in Tallinn for their alleged involvement in a massive Ponzi scheme that defrauded cryptocurrency investors of millions of dollars. The scheme, which ran from 2015 to 2019, targeted hundreds of thousands of investors through two fraudulent investment opportunities.
The primary scheme involved HashFlare, a company that claimed to allow clients to rent a portion of its cryptocurrency mining operations in exchange for the virtual currency it generated. Investors were led to believe that they were making significant profits, with over $550 million being invested in the firm over the four-year period. However, investigations revealed that HashFlare’s mining equipment was operating at less than 1% of the computing power it purported to have. When investors attempted to withdraw their funds, Potapenko and Turõgin either refused or used funds from new investors to pay off earlier ones.
In a separate scheme launched in 2017, the duo promoted a virtual currency bank called Polybius, promising investors dividends from its profits. Despite raising $25 million for the fictitious bank, it was later discovered that Polybius never actually existed.
To launder their ill-gotten gains, Potapenko and Turõgin allegedly used shell companies, fake contracts, and invoices to purchase 75 properties, luxury vehicles, cryptocurrency wallets, and thousands of mining machines.
The two men now face charges of conspiracy to commit wire fraud, wire fraud, and money laundering, each carrying a maximum sentence of 20 years in prison if convicted. US attorney Nick Brown described the scheme as “truly astounding,” highlighting how the defendants exploited the allure of cryptocurrency and mining to execute a massive Ponzi scheme.
Authorities from the US and Estonia are working together to seize and restrain the assets obtained through the fraudulent activities, including properties, vehicles, and virtual currency wallets. The goal is to remove the profit from these crimes and hold the perpetrators accountable for their actions.