FBI arrests Estonians for large-scale cryptocurrency fraud

The Estonian Central Criminal Police, together with the FBI, detained two founders of the cloud-based bitcoin miner HashFlare, who are suspected of fraudulently using cryptocurrency for $ 575 million. According to the information gathered during the investigation, the Estonian citizens were operating a Ponzi scheme, using the money of new investors to pay off those who had invested in HashFlare earlier.

Sergiy Potapenko and Ivan Turygin managed to involve hundreds of thousands of clients from all over the world in their fraudulent scheme, who are now waiting for the return of their lost funds. The fraudsters invested the money they received from investors in buying real estate and setting up shell companies to launder their profits. «These two took advantage of both the availability of cryptocurrency and some of the uncertainty surrounding mining to launch a massive Ponzi scheme,» said U.S. Attorney Nick Brown.

HashFlare, a cloud mining company, was founded in 2015, allegedly allowing customers to rent hash capacity to mine cryptocurrencies and receive an equivalent share of the profits. Until 2018, HashFlare was popular, but then Potapenko and Turygin decided to stop a significant part of their mining operations, explaining that they had difficulty generating revenue amid market fluctuations. Customers were not reimbursed for the funds paid in advance, according to the terms of the contracts.

The founders of HashFlare are accused of conspiracy to commit fraud. If found guilty, Potapenko and Turygin face up to 20 years in prison.

As a reminder, over the weekend, more detailed information about the trial of another cryptocurrency fraudster was released. According to a new ruling signed by a district court judge, the case of laundering bitcoins stolen by hackers from Bitfinex involves classified information. Heather Morgan, better known as Razzlekhan, is accused of laundering billions of stolen BTC together with her husband Ilya Lichtenstein.

Heather Morgan and her husband, Ilya Lichtenstein, are accused of laundering stolen weapons and military equipment. The Bitfinex digital currency exchange service was hacked in August 2016, which at the time was the second largest hack of a bitcoin exchange platform. 119,756 BTC were stolen, which at the time were worth about $ 72 million. In February 2022, the US government confiscated about 94,000 of the stolen BTC thanks to the decryption of a file belonging to Ilya Lichtenstein.