Financial Crime World

Title: Two Estonian Men Charged in $575 Million Cryptocurrency Fraud and Money Laundering Scheme

Arrest of Two Estonian Men in Connection with Complex Cryptocurrency Scam

  • Sergei Potapenko, 37, and Ivan Turõgin, 37, were arrested in Tallinn, Estonia, on Oct. 31.
  • An 18-count indictment alleges their involvement in a fraud and money laundering conspiracy worth over $575 million.

Indictment: HashFlare and Polybius Bank Scam

The indictment, unsealed on Oct. 31, reveals that the men:

  1. Induced victims to enter into fraudulent equipment rental contracts with HashFlare, a cryptocurrency mining service.
  2. Promised victims returns on their investments but instead used shell companies to launder the fraud proceeds.
  3. Bought real estate, luxury cars, and other assets with the ill-gotten gains.

False Representations and Ponzi Scheme

  • HashFlare offered contracts to customers based on the false pretense of a massive cryptocurrency mining operation.
  • Mining machine contracts misled customers with promised payments in mined cryptocurrency.
  • Potapenko and Turõgin paid early investors with funds from later investors, creating a Ponzi scheme.

Investments in Polybius: False Promises

  • In May 2017, the men offered investments in a non-existent virtual currency bank called Polybius.
  • They promised investors dividends from Polybius’ profits, raising at least $25 million.

Money Laundering Conspiracy

  • The men used shell companies and phony contracts and invoices to launder their criminal proceeds.
  • Seized assets include at least 75 properties, six luxury vehicles, cryptocurrency wallets, and thousands of cryptocurrency mining machines.

Charges and Penalties

  • Potapenko and Turõgin are charged with conspiracy to commit wire fraud, 16 counts of wire fraud, and one count of conspiracy to commit money laundering.
  • They face a maximum penalty of 20 years in prison if convicted.

FBI and International Cooperation

  • The FBI is committed to pursuing subjects across international boundaries involved in complex fraud schemes.
  • Thousands of victims from around the world, including the United States, were targeted in this case.
  • The United States thanks Estonian law enforcement agencies and the Department of Justice’s Office of International Affairs for their support.