SEATTLE - Two Estonian nationals were extradited to the United States from Estonia to face charges in a $575 million cryptocurrency fraud and money laundering scheme. Sergei Potapenko and Ivan Turõgin, both 39, made their initial appearance in the U.S. District Court in Seattle today following their arrest in Tallinn, Estonia, on November 20, 2022.
The defendants are accused of orchestrating a Ponzi scheme through their cryptocurrency mining service, HashFlare, and a related investment company, Polybius. According to the indictment, from 2015 to 2019, victims worldwide entered into HashFlare contracts worth over $550 million, under the pretense that they were investing in a significant cryptocurrency mining operation. However, HashFlare allegedly conducted less than one percent of the mining activity it claimed.
Furthermore, Potapenko and Turõgin are charged with offering investments in Polybius, falsely claiming it would become a bank specializing in virtual currency. They raised at least $25 million from investors, promising dividends from the company's profits, which never materialized. Instead, the indictment alleges that they used the funds to purchase luxury items and real estate, creating a complex web of shell companies and phony contracts to launder the proceeds.
The indictment includes charges of conspiracy to commit wire fraud, 16 counts of wire fraud, and one count of conspiracy to commit money laundering. If convicted, Potapenko and Turõgin could face a maximum penalty of 20 years in prison on each count.
The case is being investigated by the FBI with assistance from the Cybercrime Bureau of the National Criminal Police of the Estonian Police and Border Guard, the Justice Department’s Office of International Affairs, and U.S. Customs and Border Protection. The announcement was made by officials including Principal Deputy Assistant Attorney General Nicole M. Argentieri and U.S. Attorney Tessa M. Gorman for the Western District of Washington.
Victims of the alleged fraud are encouraged to visit the FBI's dedicated webpage for this case. While an indictment is only an allegation and all defendants are presumed innocent until proven guilty, this extradition signifies a significant step in the United States' efforts to combat international cybercrime and financial fraud. The information in this article is based on a press release statement from the U.S. Department of Justice.
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