The Estonian National Criminal Police and the U.S. Federal Bureau of Investigation (FBI) arrested Sergei Potapenko and Ivan Turõgin, suspects related to a $575 million cryptocurrency fraud and money laundering case in a joint operation this week.
According to court documents, Potapenko and Turõgin, both 37, allegedly defrauded hundreds of thousands of victims through a multifaceted scheme.
They induced victims to enter into fraudulent equipment rental contracts with the defendants’ cryptocurrency mining service called HashFlare.
They also tricked victims into investing in a virtual currency bank called Polybius Bank. In reality, Polybius was never actually a bank, and never paid out the promised dividends. Victims paid more than $575 million to Potapenko and Turõgin’s companies.
The pair then used shell companies to launder the fraud proceeds and to purchase real estate and luxury cars.
“The size and scope of the alleged scheme is truly astounding. These defendants capitalized on both the allure of cryptocurrency and the mystery surrounding cryptocurrency mining, to commit an enormous Ponzi scheme,” said U.S. Attorney Nick Brown for the Western District of Washington.