Two Estonian men have been detained by the U.S. Department of Justice in Tallinn, Estonia, for their alleged involvement in a complex scheme based on the use of shell companies to conceal the proceeds of crypto fraud. $575 million is charged across the 18-count indictment.
Both Sergei Potapenko and Ivan Turgin, both 37, duped victims into investing in a phoney cryptocurrency bank named Polybius Bank that failed to distribute dividends to investors by setting up fictitious equipment-rental contracts for a service called HashFlare. According to court filings, many people fell for the scams.
Between 2015 and 2019, HashFlare was operational and is said to have generated $550 million in revenue. According to reports, the bitcoin mining equipment only used 1% of the computer power it claimed to have. Founded in 2017, Polybius raised $25 million, which was transferred to the defendants’ other bank accounts and crypto wallets.
Assistant Attorney General Kenneth A. Polite, Jr. from the Criminal Division in the Department of Justice, said:
They tried to hide their ill-gotten gains in Estonian properties, luxury cars, and bank accounts and virtual currency wallets around the world. U.S. and Estonian authorities are working to seize and restrain these assets and take the profit out of these crimes.
In addition to 75 properties, six high-end vehicles, and thousands of crypto mining equipment, the statement said that the money laundering scheme also involved these items.
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On Nov. 20, Turgin and Potapenko were detained, and the Justice Department has since filed charges against them for “conspiracy to commit wire fraud, 16 counts of wire fraud, and one count of conspiracy to commit money laundering.”
The FBI is looking into the matter right now. The pair may receive a 20-year prison sentence if found guilty. A federal district court judge will make the decision in this case.