Two Estonian citizens have been arrested by their country’s police for cryptocurrency-related scams. Sergei Potapenko and Ivan Turõgin had notably collected about $575 million from citizens, including Americans, who thought they were investing in a crypto mining company and bank. If convicted, the two suspects each face up to 20 years in prison. This is yet another case to add to the long list of scam cases involving crypto in the US.
Two dummy companies promising big gains
Accused of large-scale cryptocurrency scams, two Estonian citizens have been arrested in their country, according to a statement from the U.S. Department of Justice.
Using two fictitious crypto companies, the two suspects managed to defraud approximately $575 million from victims living in both the United States and other countries. Both suspects face up to 20 years in prison each. But, how did they attract so much investment?
In 2015, Sergei Potapenko and Ivan Turõgin created HashFlare, a mining company that was supposed to redistribute profits from operations to investors according to the size of their investment.
In reality, HashFlare had no mining equipment. The company sometimes paid old investors with the funds of new ones. In 2019, the company finally disappeared after raising more than $550 million from thousands of investors in its five-year existence.
The second bait Potapenko and Turõgin used to attract investors was Polybius.
Founded in 2017, this company was presented as a crypto bank whose investors were to benefit from dividends on profits. The two suspects managed to collect at least $25 million from investors. The promised crypto bank obviously never saw the light of day.
In all, the two Estonians have raised a whopping $575 million. This is enough to surprise many people, including within the American administration.
The size and scope of the alleged scheme is truly staggering. The defendants capitalized on both the allure of cryptocurrency and the mystery surrounding its mining to set up a massive Ponzi scheme. They lured investors with false claims, then paid off early investors with money from later investors.
Nick Brown, U.S. Attorney for the District of Washington
According to US authorities, the scammed funds were laundered through shell companies and used to buy luxury properties and cars in Estonia. Some of the money was hidden in bank accounts and crypto wallets.
In addition, another part of scammed funds could have been used to finance the campaign for the 2019 European Parliament.
Indeed, Estonian media revealed that the two suspects were among the biggest donors to Raimond Kaljulaid. The Estonian politician and legislator had received €12,500 from Potapenko and Turõgin. Kaljulaid claimed that he never knew about their alleged involvement in illegal activities.
Crypto Ponzi schemes are everywhere
The American authorities are very involved in the investigations of the crypto scam set up by the two Estonians. The reason is simple: among the victims are a significant number of Americans.
This is not the first time that Ponzi schemes have emerged in the United States. In just a few months, Coinpri has listed at least 5 crypto Ponzi schemes that have been dismantled by the US authorities.
In May, the FBI announced the arrest of the CEO of a “crypto company” claiming to offer a 5% return per week to its customers.
In September, we saw the dismantling of EmpiresX, a ponzi scheme that siphoned more than $100 million from investors.
A month later, 11 crypto companies were banned from operating in California primarily on charges of running a Ponzi scheme.
About two weeks ago, four Americans were prosecuted by the Securities and Exchange Commission for setting up and running Trade Coin Club, a Ponzi scheme that ruined more than 100,000 people by taking more than 82,000 bitcoins.
Because of its fundamentals, crypto offers undeniable economic opportunities to the citizens of the world. It also expands the risk of scams. Before entrusting your money to a crypto project, you should be as informed as possible.
I dream of a world where every citizen has total control over themselves, including their finances. I believe that Bitcoin is one of the tools that will achieve this revolution. Since 2019, I am learning about this cryptocurrency and spreading the word around.
