The U.S. Department of Justice has arrested two Estonian citizens in Tallinn, Estonia for their alleged multi-layered scheme based on shell companies used to launder fraud proceeds. The 18-count indictment totals $575 million.
Sergei Potapenko and Ivan Turõgin, both 37, set up sham equipment-rental contracts for a crypto mining service called HashFlare and led victims to invest in a fake crypto bank called Polybius Bank which did not pay out customers’ dividends. Hundreds of thousands of people fell victim to the schemes, court documents show.
HashFlare was active between 2015 and 2019, and allegedly resulted in proceeds worth $550 million. The mining equipment apparently mined bitcoin at less than 1% of the computing power it claimed to have. Polybius was set up in 2017 and raised $25 million, which was sent to other bank accounts and crypto wallets the defendants owned.
“They tried to hide their ill-gotten gains in Estonian properties, luxury cars, and bank accounts and virtual currency wallets around the world,” said Assistant Attorney General Kenneth A. Polite, Jr. from the Criminal Division in the Department of Justice. “U.S. and Estonian authorities are working to seize and restrain these assets and take the profit out of these crimes.”
The money laundering scheme involved 75 properties, six luxury vehicles and thousands of cryptocurrency mining machines, according to the statement.
Turõgin and Potapenko were arrested on Nov. 20 and charged with “conspiracy to commit wire fraud, 16 counts of wire fraud, and one count of conspiracy to commit money laundering,” according to the Justice Department.
The FBI is currently investigating the case. If the duo is convicted, it may face a 20-year prison sentence. This will be up to a federal district court judge to rule.
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