Two Estonian nationals, Sergei Potapenko and Ivan Turõgin, both 39, are currently on trial in the United States, facing charges for orchestrating a colossal $575 million cryptocurrency mining fraud scheme.
The trial, which commenced recently following their extradition from Estonia, has captured the attention of the global crypto community mainly due to the large sum that was stolen from the firm.
The duo was apprehended in Tallinn, Estonia, on November 20, 2022, and now faces an 18-count indictment in the Western District of Washington.
Charges against them stem from their alleged involvement in a sophisticated Ponzi scheme that operated under the guise of a cryptocurrency mining service named HashFlare.
Between 2015 and 2019, Potapenko and Turõgin are accused of deceiving hundreds of thousands of victims into purchasing contracts that supposedly entitled them to a share of the virtual currency mined by HashFlare’s operation
However, the indictment reveals that HashFlare’s claims of operating a massive cryptocurrency mining operation were grossly overstated.
In reality, the service engaged in less than one percent of the Bitcoin mining activity it claimed to conduct.
When investors sought to withdraw their mining proceeds, the defendants were unable to fulfill these requests with the mined currency they had promised. Instead, they either delayed the payments or used virtual currency purchased on the open market to settle investor withdrawals.
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The deceit didn’t stop at HashFlare. In May 2017, Potapenko and Turõgin launched another venture, Polybius, which they claimed would establish a bank specializing in virtual currency.
Investors were enticed by the promise of dividends from Polybius’ profits. The project raised at least $25 million, but Polybius never materialized into a bank, nor did it pay any dividends.
Instead the funds were funneled into various bank accounts and virtual currency wallets controlled by the defendants and their co-conspirators
The charges against Potapenko and Turõgin include conspiracy to commit wire fraud, 16 counts of wire fraud, and one count of conspiracy to commit money laundering. Each charge carries a maximum penalty of 20 years in prison.
For more detailed information on the case and trial proceedings, please refer to the official Department of Justice press release.
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