Cryptocurrency fraudsters from Estonia stole $ 577 million worth of digital tokens through fake mining

Two Estonian nationals, Sergei Potapenko and Ivan Turogin, pleaded guilty to a $ 577 million cryptocurrency fraud case for selling fake mining contracts on behalf of their company HashFlare. As part of the plea deal, the defendants agreed to forfeit $ 400 million worth of assets, including real estate, luxury cars, and cryptocurrency accounts.

The U.S. Attorney’s Office for the Western District of Washington reported that between 2015 and 2019, HashFlare sold mining contracts worth more than $ 577 million, but did not actually have the necessary computing power to perform the promised operations. Instead, the company used falsified data to create the illusion of successful operations.

In addition, Potapenko and Turogin admitted to running another fraudulent scheme, the Polybius project, which promised to create a digital bank and raised about $ 31 million during an initial coin offering (ICO) in 2017. However, no investments were made in the bank and no dividends were paid to investors. Instead, the funds were used for the personal benefit of the founders.

The FBI alleges that the defendants laundered funds through a network of 75 properties, six luxury cars, crypto wallets, and thousands of mining devices. Potapenko and Turogin were arrested on November 20, 2022, in Tallinn, Estonia, and extradited to the United States for further trial.

The prosecutor’s office notes that the defendants could face up to 20 years in prison on charges of conspiracy to commit fraud, and the sentencing hearing is scheduled for May 8, 2025.