Department Of Justice Charged HashFlare Founders With Crypto Scam Allegations

The two men, founders of the Bitcoin cloud miner HashFlare, according to the Department of Justice, used shell companies to launder the money from their fraudulent schemes before using it to purchase expensive cars and property in Estonia.

The indictment, which was made public on Monday, claims that Estonia residents Sergei Potapenko and Ivan Turõgin were partners in a network of connected cryptocurrency fraud schemes.

The two defendants reportedly spent investor money on expensive automobiles and real estate in Estonia while using a number of shell companies to launder the revenues of their scams.

A cloud mining company called HashFlare was established in 2015 to enable users to rent the company’s hashing power to mine cryptocurrencies and get a proportionate share of the revenues.

The company, which at the time was regarded as one of the top names in the industry, shut down a significant chunk of its mining activities in July 2018.

However, the whole mining operation, led by founders Sergei Potapenko and Ivan Turõgin, was a part of a multi-faceted conspiracy that defrauded hundreds of thousands of victims, according to a statement from the US Department of Justice citing court records.

Customers of HashFlare allegedly saw statements with fictitious crypto balances. Customers who attempted to cash out, according to the prosecution, were given the runaround by Potapenko and Turõgin, who allegedly made them jump through legal hoops like meeting know-your-customer (KYC) requirements before they could be paid.

This includes getting victims to sign fraudulent equipment leasing contracts through HashFlare and enticing other victims to put money into a phony virtual currency bank named Polybius Bank.

Prosecutors claim that $550 million had been raised by the time HashFlare was finally shut down.

One case of conspiracy to commit wire fraud, 16 counts of wire fraud, and one count of conspiracy to commit money laundering are the charges against Potapenko and Turõgin, respectively.

On November 20, Tallinn police detained Potapenko and Turõgin. There has been a call for a jury trial in the Western District of Washington.

The two are also charged with planning to utilize 75 houses, six luxury cars, hundreds of cryptocurrency mining devices, cryptocurrency wallets, and other methods to launder their criminal proceeds.

The last time HashFlare made a public announcement was on August 9, 2019, when they stated they were stopping the selling of ETH contracts because the present capacity had been sold out.

Although the company teased further announcements and promised to resume operations in the “very near future,” nothing about what had transpired was ever made public, and HashFlare quietly vanished.

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