Two Estonian nationals have reportedly pleaded guilty to an alleged $577M cryptocurrency fraud scheme.
The scheme is said to have victimized hundreds of thousands of people in the United States and abroad.
As stated in the announcement, two Estonian nationals pleaded guilty for their operation of “a massive, multi-faceted cryptocurrency Ponzi scheme that victimized hundreds of thousands of people from across the world, including in the United States.”
As part of the defendants’ guilty pleas, they agreed “to forfeit assets valued over $400 million obtained during the conspiracy.”
According to court documents, Sergei Potapenko and Ivan Turõgin, both 40, sold “contracts to customers entitling them to a share of cryptocurrency mined by the defendants’ purported cryptocurrency mining service, HashFlare.”
Cryptocurrency mining is the process of “using computers to generate cryptocurrency, such as Bitcoin, for profit.”
Between 2015 and 2019, Hashflare’s sales totaled “more than $577 million, but HashFlare did not possess the requisite computing capacity to perform the vast majority of the mining the defendants told HashFlare customers it performed.”
HashFlare’s web-based dashboard, which “purported to show customers their mining profits, instead reflected falsified data.”
Potapenko and Turõgin used “the proceeds of the fraud conspiracy to purchase real estate and luxury vehicles and maintained investment and cryptocurrency accounts.”
Potapenko and Turõgin have agreed “to forfeit assets worth, as of the date of the plea, more than $400 million.”
The forfeited assets will be available for “a remission process to compensate victims of the crime.”
Details about the remission process “will be announced at a later date.”
Potapenko and Turõgin each pleaded “guilty to one count of conspiracy to commit wire fraud.”
They are scheduled to be sentenced “on May 8 and each face a maximum penalty of 20 years in prison.”
A federal district court judge will “determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.”
The US Justice Department thanks the Cybercrime Bureau of the Estonian Police and Border Guard for its support “with this investigation.”
The Estonian Prosecutor General and Ministry of Justice and Digital Affairs provided “substantial assistance with the extradition.”
The Justice Department’s Office of International Affairs “provided extensive assistance to the investigation and the extradition of the defendants.”
Supervisory Official Antoinette T. Bacon of the Justice Department’s Criminal Division, Acting U.S. Attorney Teal Luthy Miller for the Western District of Washington, Assistant Director Chad Yarbrough of the FBI’s Criminal Investigative Division, and Special Agent in Charge W. Mike Herrington of the FBI Seattle Field Office made the announcement.
The FBI Seattle Field Office investigated the case.
