FBI seeks victims of defunct Bitcoin mining platform as two arrested

FBI seeks victims of defunct Bitcoin mining platform as two arrested

  • Two Estonians were arrested for allegedly committing crypto fraud worth over $575 million
  • The accused are the figures behind the now defunct Bitcoin cloud-mining service provider – HashFlare
  • They are said to have used the money to buy property and luxury cars

The US Department of Justice (DoJ) announced the arrest of two Estonians in the capital Tallinn. The department has accused them of committing crypto fraud and money laundering. The fraudsters – Sergei Potapenko and Ivan Turõgin – were the minds behind the now defunct Bitcoin cloud mining service provider – HashFlare.

The Estonians are accused of defrauding investors of $575 million in crypto schemes. The Federal Bureau of Investigation (FBI) has taken over the investigation of this case and is searching for potential victims of HashFlare. Also, if found guilty of committing these crimes, the defendants face up to 20 years in prison.

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Defunct Bitcoin mining service reportedly takes home millions of dollars

The crypto mining service provider was a subsidiary of HashCoins OU. The platform provided cloud mining services for Bitcoin, Ethereum, Litecoin, DASH and ZCash. It went under in August 2019, citing the crypto bear market and the unprofitability of Bitcoin mining as the reason. And given that the platform operated on an annual contract, many people stood to lose money as the firm’s T&C allowed it to terminate contracts without making any refunds.

The latest information provided by the DoJ claims that Hashflare does not have the mining equipment it claimed to have in the first place. The press release further states,

“When investors requested to withdraw their mining earnings, Potapenko and Turõgin were unable to pay the mined currency as promised. Instead, they either resisted paying, or paid the investors using virtual currency the defendants had purchased on the open market – not currency they had mined.”

In particular, the accused were singled out not only for their involvement in HashFlare, but also Polybius, a platform that would act as a cryptocurrency bank. The defendant raised nearly $25 million from investors over the promise to pay them in dividends for Polybius.

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However, the dividend was never delivered. And the collected money was transferred to other bank accounts and wallets controlled solely by the accused. Potapenko and Turõgin allegedly laundered some of these funds to shell companies to buy nearly 75 properties and luxury cars.

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