Both Sergei Potapenko, 37, and Ivan Turõgin, are citizens of Estonia. They are two of the people behind the cryptocurrency mining service HashFlare.
Potapenko and Turõgin claimed that HashFlare was a massive cryptocurrency mining operation and induced people to enter into fraudulent equipment rental contracts with the service. Between 2015 to 2019, customers from different parts of the world, including Washington, United States, entered into over $550 million worth of contracts with the service.
In May 2017, Potapenko and Turõgin offered investments in a virtual currency bank called Polybius Banks, which was never actually a bank. In this scheme, they raised at least $25 million and transferred most of the money to other bank accounts and virtual currency wallets controlled by them.
In 2019, HashFlare closed its operations. Potapenko and Turõgin used shell companies to launder the proceeds of their cryptocurrency fraud and to buy real estate and luxury cars.
On October 27, 2022, a grand jury indicted Potapenko and Turõgin on 18 counts. Four other people living in Belarus, Estonia and Switzerland were also charged but their identities have yet to be released.
On November 20, 2022, Potapenko and Turõgin were arrested in Tallinn, Estonia. They were each charged with conspiracy to commit wire fraud, conspiracy to commit money laundering and 16 counts of wire fraud.
Cryptocurrency mining is the process of using computers to generate cryptocurrency for profit. The process involves validating cryptocurrency transactions on a blockchain network and adding them to a distributed ledger.
The mining process is crucial for validating transactions because distributed ledgers do not have a centralized authority. Miners are rewarded with new coins after they deploy machines that solve complex mathematical equations in the form of cryptographic hashes.
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