Two Estonian nationals pleaded guilty to running a large-scale cryptocurrency Ponzi scheme . The scheme defrauded hundreds of thousands of people worldwide, including in the United States. The defendants agreed to forfeit more than $400 million in assets obtained through the fraud, the DOJ reported.
HashFlare Founders Admit to Crypto Fraud
Sergei Potapenko and Ivan Turõgin, both 40, admitted to misleading customers through their company, HashFlare. They sold contracts promising customers a share of cryptocurrency mined by HashFlare. However, court documents state that the company lacked the computing power needed for the mining it claimed to perform.
Between 2015 and 2019, HashFlare generated more than $577 million in sales. Customers used a web-based dashboard to track supposed mining profits, but the data was falsified. The defendants used the proceeds to buy real estate, luxury vehicles, and cryptocurrency investments.
Earlier, two individuals were charged by the US government for operating a multi-billion-dollar money laundering scheme. Law enforcement agencies, with international cooperation, seized websites linked to illegal cryptocurrency exchanges, as reported by Finance Magnates.
The operation disrupted three exchanges used to launder funds, primarily for ransomware groups, darknet drug traffickers, and other criminals. The individuals, of Russian nationality, allegedly facilitated payments for stolen credit card data, ransomware profits, and fraud.
Defendants Forfeit $400M to Compensate Victims
As part of their guilty pleas, Potapenko and Turõgin agreed to forfeit assets worth more than $400 million. These funds will be used for a remission process to compensate victims. Authorities will announce details of this process later.
Each defendant pleaded guilty to one count of conspiracy to commit wire fraud. They face up to 20 years in prison and will be sentenced on May 8. A federal judge will determine their sentences based on US Sentencing Guidelines and other factors.
The Justice Department acknowledged assistance from the Estonian Police and Border Guard’s Cybercrime Bureau. The Estonian Prosecutor General and Ministry of Justice and Digital Affairs supported the extradition process. The Justice Department’s Office of International Affairs also assisted with the investigation.
