Sergei Potapenko, HashFlare Ponzi Scheme, Washington 2022

Two Estonian Citizens Extradited to U.S. for Massive Cryptocurrency Ponzi Scheme

Seattle, Washington - Two Estonian citizens, Sergei Potapenko and Ivan Turõgin, both 39, were extradited to the United States and appeared in U.S. District Court in Seattle on May 31, 2024, following their extradition from Estonia, announced U.S. Attorney Tessa M. Gorman.

The defendants were arrested in Tallinn, Estonia on November 20, 2022, on an 18-count indictment from the Western District of Washington charging conspiracy, wire fraud, and conspiracy to commit money laundering. The Estonian government authorized extradition. Late last week the Estonian Supreme Court declined to intervene in the extradition proceeding, clearing the way for the defendants’ removal to the United States. The FBI escorted the defendants to the United States.

According to the indictment, Potapenko and Turõgin are alleged to have induced hundreds of thousands of victims to purchase contracts in a cryptocurrency mining service called HashFlare. Victims paid more than $575 million to the defendants’ companies. The defendants then used shell companies to launder the fraud proceeds and to purchase real estate and luxury cars.

The indictment alleges that HashFlare did not have the virtual currency mining equipment it claimed to have. In fact, according to the indictment, HashFlare’s equipment performed Bitcoin mining at a rate of less than one percent of the computing power it purported to have. When investors asked to withdraw their mining proceeds, the defendants were not able to pay with the mined currency as promised. Instead, the defendants either resisted making the payments, or paid off the investors using virtual currency the defendants had purchased on the open market—not currency they had mined.

The indictment also charges the defendants with conspiring to launder their criminal proceeds by using shell companies and phony contracts and invoices. The indictment alleges that the money laundering conspiracy involved at least 75 real properties, six luxury vehicles, cryptocurrency wallets, and thousands of cryptocurrency mining machines.

The men are charged with conspiracy to commit wire fraud, 16 counts of wire fraud, and one count of conspiracy to commit money laundering. Each of these crimes is punishable by up to 20 years in prison.

The charges contained in the indictment are only allegations. A person is presumed innocent unless and until he or she is proven guilty beyond a reasonable doubt in a court of law.

The FBI is investigating the case. The United States thanks the Cybercrime Bureau of the National Criminal Police of the Estonian Police and Border Guard for its support with this investigation. The U.S. Office of International Affairs provided extensive assistance to the investigation and in securing the arrests and extraditions. U.S. Customs and Border Protection assisted in facilitating the defendants’ entrance to the United States.

Source: https://www.justice.gov/usao-wdwa/pr/two-estonian-defendants-indicted-massive-cryptocurrency-ponzi-scheme-extradited-us