Two Estonian nationals have been charged in a $575 million scam in a digital mining service by DailyCoin

Two Estonian nationals have been charged in a $575 million scam involving a digital mining service
  • The US Department of Justice has arrested Sergey Potapenko and Ivan Torogin for running multiple Ponzi schemes and frauds totaling $575 million in lost clients’ funds.
  • The 37-year-old Estonian cryptocurrency miner HashFlare has offered users to lease the company’s mining operations. It turns out that it has no mining equipment that it claims to have.
  • The two men also stole $25 million from investors who put their money into Polybius, a company that was supposed to become a crypto bank.
  • Potapenko and Torogyn attempted to launder the stolen money through fake accounts and fake invoices.
  • If convicted, they face 20 years in prison.

The US Department of Justice has announced the arrest of two Estonian nationals who ran multiple cryptocurrency scams that netted out $575 million from hundreds of thousands of customers around the world.

From 2015 to 2019, Sergey Potapenko and Ivan Torogin, both 37-year-olds based in Tallinn, ran crypto mining company HashFlare. Their company allowed users to lease mining operations in exchange for a portion of the mined cryptocurrency. Potential clients need to sign a contract with the company and deposit money, in addition to paying a service fee. The customers, who have pumped in over $550 million over four years, were able to see how much they had earned mining HashFlare right on their website.

However, the investigators found that HashFlare did not have the mining equipment it claimed to have. The company’s hardware was capable of mining at a rate of less than 1% of the computer power it claimed to have. When some investors requested withdrawals of their funds, HashFlare either failed to honor the withdrawals or pay them back with the cryptocurrencies they had purchased immediately.

Potapenko and Turogin’s other scam involved an entity called Polybius. This was supposed to become a bank specializing in cryptocurrencies. The two men offered potential investors a dividend from the company’s profits and managed to raise at least $25 million. Polybius never became a bank, nor did he pay any dividends.

“The scale and scope of the alleged scheme is truly staggering. These defendants took advantage of the allure of cryptocurrency and the ambiguity surrounding cryptocurrency mining to perpetrate a massive Ponzi scheme,” said US Attorney Nick Brown of the Western District of Washington. The pair transferred the money collected, along with money stolen from HashFlare customers, into their bank accounts and crypto wallets. Then they used fake companies and fake invoices to launder money. The entire money laundering scheme involved at least 75 different properties in Estonia, six luxury cars, cryptocurrency wallets, and a massive amount of cryptocurrency mining equipment.

The FBI is currently investigating the case. If Potapenko and Torogin are found guilty, they face 20 years in prison.

on the flip side

  • The two accomplices in the crime, Sergey Potapenko and Ivan Torogin, have yet to be found guilty.

Why should you bother

The charges against Sergey Potapenko and Ivan Torogin show that suspicious activity was rampant in the early days of cryptocurrency. However, investors must do thorough due diligence before making investment decisions. Recent revelations about FTX show that scams and scams still exist in the industry.

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