- The founders of the $550 million Hashflare scam have appeared in a US court following their extradition from Estonia
- Sergei Potapenko and Ivan Turõgin allegedly orchestrated a cryptocurrency fraud scheme, deceiving hundreds of thousands of investors
- The pair promoted Hashflare as a large-scale mining service, convincing victims to buy contracts for non-existent mining returns
The founders of the $550 Hashflare scam appeared in a US court recently following their extradition from Estonia. According to the indictments against them, Sergei Potapenko and Ivan Turõgin allegedly orchestrated the cryptocurrency fraud scheme, deceiving hundreds of thousands of investors in the process. The duo promoted Hashflare as a large-scale cryptocurrency mining service, convincing victims to purchase contracts that would entitle them to a share of the mined virtual currency, when in fact they kept the funds for themselves.
Hashflare Conducted 1% of Promised Activities
The Department of Justice (DoJ) alleges that from 2015 to 2019, investors worldwide poured over half a billion dollars into Hashflare contracts, with Potapenko and Turõgin claiming that Hashflare operated extensive cryptocurrency mining operations. Customers paid fees to rent a portion of the company’s supposed mining capacity, expecting to receive the virtual currency generated by their share.
However, the indictment reveals that Hashflare possessed only a fraction of the mining equipment it claimed to have, engaging in less than one per cent of the advertised bitcoin mining activity. When investors attempted to withdraw their earnings, Potapenko and Turõgin allegedly failed to deliver the promised mined currency, either delaying payments or using cryptocurrency purchased from the open market to pay investors.
The pair were arrested in November 2022 when the charges were unsealed.
Polybuis Raised $25 Million
In addition to the Hashflare scheme, Potapenko and Turõgin also launched another venture, Polybuis, in May 2017, claiming that the company would establish a bank specializing in virtual currency and promised dividends from its profits. The pair raised at least $25 million for Polybius, using approximately $7 million from Hashflare proceeds.
Despite their promises, however, Polybius never formed a bank or paid any dividends, with most of the funds allegedly diverted to other accounts and wallets controlled by Potapenko, Turõgin, and their co-conspirators.
Potapenko and Turõgin Laundered Proceeds
The total losses for victims of these schemes exceed $575 million, with the indictment further alleging that Potapenko and Turõgin laundered the fraud proceeds through shell companies and falsified contracts and invoices. These activities were purportedly used to acquire real estate, luxury cars, and thousands of cryptocurrency mining machines. The money laundering conspiracy is said to involve at least 75 properties, six luxury vehicles, cryptocurrency wallets, and a multitude of mining machines.
Potapenko and Turõgin face serious charges, including conspiracy to commit wire fraud, 16 counts of wire fraud, and one count of conspiracy to commit money laundering. If found guilty, they could each face a maximum penalty of 20 years in prison for each count.
