Two Estonians Arrested for Allegedly Running a $575 Million Crypto Fraud
The Estonian police arrested two individuals in the country’s capital Tallinn for their alleged involvement in a $575 million cryptocurrency scam.
According to the prosecution, Sergei Potapenko and Ivan Turõgin lured hundreds of thousands of victims to interact with a dubious digital asset mining service and to invest in a virtual currency bank. The entities did not pay the promised dividends to the people, while the criminals pocketed the funds.
Another Multi-Million Crypto Fraud
According to US court documents, the wrongdoers urged people to allocate their savings to a crypto mining company called HashFlare and a digital asset bank named Polybius. Potapenko and Turõgin promised considerable returns to those that entered the scheme and even paid some profits to the early investors.
At one point, though, they stopped transferring the previously negotiated dividends, while HashFlare and Polybius turned out to be unregulated entities.
“New technology has made it easier for bad actors to take advantage of innocent victims – both in the US and abroad – in increasingly complex scams,” said Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division.
The two Estonian citizens pocketed around $575 million worth of crypto. The prosecutors claimed they transferred the assets to shell companies to launder proceeds and later purchased luxury cars and at least 75 properties.
Nick Brown – the US Attorney for the Western District of Washington – said the size and scope of the scheme are “truly astounding.” He outlined that the Estonian authorities have joined forces with American agencies to seize the multi-million stash from the criminals.
“The FBI is committed to pursuing subjects across international boundaries who are utilizing increasingly complex schemes to defraud investors.
Victims in the US and abroad invested into what they believed were sophisticated virtual asset ventures, but it was all part of a fraudulent scheme, and thousands of victims were harmed as a result,” said Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division.
Potapenko and Turõgin both face numerous charges, including 16 counts of wire fraud and one count of conspiracy to commit money laundering. They could receive a maximum penalty of 20 years in jail if found guilty.
The Historic Seizure
The US Department of Justice (DoJ) recently disclosed the confiscation of more than 50,000 BTC from a wrongdoer called James Zhong, who allegedly scammed the darknet marketplace Silk Road. The authorities seized the assets last November when bitcoin was trading at around $68,000, meaning that the crypto stash equaled over $3.3 billion.
The defendant pleaded guilty to a wire fraud and could go to prison for 20 years. Commenting on the operation was Damian Williams – the US attorney for the Southern District of New York:
“James Zhong committed wire fraud over a decade ago when he stole approximately 50,000 Bitcoin from Silk Road. For almost ten years, the whereabouts of this massive chunk of missing Bitcoin had ballooned into an over $3.3 billion mystery.”
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I’m a journalist who specializes in investigative reporting and writing. I have written for the New York Times and other publications.