Two individuals have been detained by Estonian police on suspicion of orchestrating a $575 million (£485 million) cryptocurrency fraud that claimed thousands of victims.
Sergei Potapenko and Ivan Turogin, two Estonians, are wanted by the US for extradition after Estonian police and the FBI jointly investigated the case.
The two 37-year-olds are accused of convincing individuals to invest in HashFlare, a bitcoin mining service, and Polybius, a phoney online bank.
There is a US indictment on file.
According to a statement from the US Department of Justice (DoJ), the two are charged with conspiring to commit money laundering and wire fraud, each of which carry a maximum 20-year prison sentence.
The accused have appeared in court in Tallinn, the capital of Estonia, and are being detained.
Pending extradition to the US, the statement says. There was no immediate comment from their representatives.
Giving details of the alleged scheme, the DoJ says the two defrauded victims by offering them the chance to buy into HashFlare’s cryptocurrency mining operations.
According to BBC News, Crypto mining uses computers to generate virtual coins for profit – a process that consumes significant amounts of computing power.
Customers around the world are said to have purchased more than half a billion dollars’ worth of HashFlare contracts from 2015 to 2019. But the operation allegedly overstated its capabilities.
The DoJ alleges that victims were also promised dividends if they invested in Polybius, a virtual bank Mr Potapenko and Mr Turogin said they had set up.
The defendants are said to have raised $25m this way – but no bank was ever formed.
They used shell companies to launder criminal proceeds, buying at least 75 properties and luxury cars, DoJ says.
Oskar Gross of Estonia’s police cybercrime bureau described the joint investigation – which involved 100 personnel including 15 from the American side – as “long and vast”.
It was “one of the largest fraud cases we’ve ever had in Estonia”, he said on Monday, quoted by Estonia’s ERR news agency.
“The country’s authorities also warned that technology had “broadened the risk of fraud”.
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