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Estonian law enforcement agencies detained two founders of the closed cloud cryptocurrency mining service HashFlare. They are suspected of participating in a $575 million fraudulent scheme.
The HashFlare service was created in 2015 and allowed users to rent cloud capacity for mining cryptocurrencies. At one time the company could be called one of the leaders in its field, but in 2018 the service ceased to exist. According to the US Department of Justice, the entire company was a "multi-faceted fraudulent scheme" in which "hundreds of thousands of people" lost money.
The court document alleges that HashFlare employees, led by Sergei Potapenko and Ivan Turygin, attracted clients and convinced them to enter into agreements to lease cloud capacity, but this was only a fraud. Also, the funds of the victims were attracted to a dummy bank for working with cryptocurrencies, Polybius Bank.
With the proceeds of crime, the defendants bought 75 real estate properties and 6 luxury cars. They were also found to have cryptocurrency wallets and thousands of devices for mining digital assets.
“The defendants took advantage of the attractiveness of cryptocurrencies for investors and the high level of opacity in cloud mining. The scale of this pyramid was truly amazing,” said Nick Brown, U.S. Attorney for the Western District of Washington.
Law enforcement authorities charged the Estonians with conspiracy to commit wire fraud, 16 counts of wire fraud, and 1 count of money laundering using shell companies and forged documents. If extradited to the United States, they could face up to 20 years in prison.
The HashFlare service was created in 2015 and allowed users to rent cloud capacity for mining cryptocurrencies. At one time the company could be called one of the leaders in its field, but in 2018 the service ceased to exist. According to the US Department of Justice, the entire company was a "multi-faceted fraudulent scheme" in which "hundreds of thousands of people" lost money.
The court document alleges that HashFlare employees, led by Sergei Potapenko and Ivan Turygin, attracted clients and convinced them to enter into agreements to lease cloud capacity, but this was only a fraud. Also, the funds of the victims were attracted to a dummy bank for working with cryptocurrencies, Polybius Bank.
With the proceeds of crime, the defendants bought 75 real estate properties and 6 luxury cars. They were also found to have cryptocurrency wallets and thousands of devices for mining digital assets.
“The defendants took advantage of the attractiveness of cryptocurrencies for investors and the high level of opacity in cloud mining. The scale of this pyramid was truly amazing,” said Nick Brown, U.S. Attorney for the Western District of Washington.
Law enforcement authorities charged the Estonians with conspiracy to commit wire fraud, 16 counts of wire fraud, and 1 count of money laundering using shell companies and forged documents. If extradited to the United States, they could face up to 20 years in prison.
