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Financial Fraud Statistics in Estonia: Two Nationals Charged with Massive Cryptocurrency Ponzi Scheme

Background

A massive cryptocurrency Ponzi scheme has been uncovered in Estonia, with two nationals facing criminal charges related to their roles in the scam.

Arrests and Indictment

Sergei Potapenko and Ivan Turõgin, both 39, were arrested on November 20, 2022, in Tallinn, Estonia, on an 18-count indictment filed in the Western District of Washington. The duo is charged with conspiracy to commit wire fraud, 16 counts of wire fraud, and one count of conspiracy to commit money laundering.

Scheme Details

The alleged scheme took place between 2015 and 2019, with hundreds of thousands of victims worldwide investing over $550 million in contracts with HashFlare, a purported cryptocurrency mining service. However, investigators claim that HashFlare did not have the virtual currency mining equipment it claimed to have, and instead engaged in less than one percent of the Bitcoin mining activity it professed.

Shell Companies and Phony Contracts

Potapenko and Turõgin allegedly used shell companies and phony contracts to launder the fraud proceeds. They are also accused of using a portion of the stolen funds to purchase real estate and luxury cars.

Additional Scheme: Polybius

The duo is also charged with running another scheme called Polybius, which promised investors dividends from the company’s profits. However, investigators claim that Polybius never formed a bank or paid any dividends, and that Potapenko and Turõgin used at least $7 million of HashFlare proceeds to fund the scheme.

Victim Statistics

Statistics released by the Justice Department show that victims of the schemes paid over $575 million to Potapenko and Turõgin’s companies. The duo faces charges with a maximum penalty of 20 years in prison on each count if convicted.

Investigation and Support

The case is being prosecuted by the United States Department of Justice’s Criminal Division, with assistance from the FBI’s Seattle Field Office. The Estonian Police and Border Guard’s Cybercrime Bureau also provided support with the investigation.

Impact and Lessons Learned

As authorities continue to investigate the scope of the fraud, statistics show that financial fraud remains a significant problem in Estonia, with thousands of individuals affected by similar schemes. The case serves as a stark reminder of the importance of due diligence when investing in cryptocurrency and online ventures.

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