Law enforcement officers from Estonia and the United States have arrested two men for allegedly committing large-scale cryptocurrency fraud. The Estonian nationals, who ran a crypto-mining service and a fake virtual currency bank, laundered their profits, spent on cars and real estate and donated to a politician.
Estonian Police and FBI Detain 2 Crypto Fraudsters in Joint Operation
Two Estonian citizens, suspected of fraud involving cryptocurrency and money laundering, have been arrested by the Estonian National Criminal Police and the US Federal Bureau of Investigation (FBI). The United States is now seeking their extradition.
Sergei Potapenko and Ivan Turõgin, both 37, have been accused of defrauding hundreds of thousands of people, Estonian public broadcaster Eesti Rahvusringhääling (ERR) reported. They were arrested following a joint investigation on Sunday, November 20.
Some of the victims were tricked into entering into fraudulent equipment rental contracts with their mining service called Hashflare. Others invested in Polybius Bank, a virtual currency bank that never was a bank and did not pay promised dividends.
According to an announcement from the US Department of Justice, investors paid more than $575 million to the platforms set up by the duo, who then laundered their profits through shell companies and used some of the money to buy properties in Estonia and luxury cars.
Potapenko and Turõgin tried to hide the rest of the money in bank accounts and cryptocurrency wallets around the world. U.S. and Estonian authorities are working to seize and detain these assets, said U.S. Attorney Nick Brown for the Western District of Washington, who also pointed out:
The size and scope of the alleged scheme is truly staggering. These defendants capitalized on both the lure of cryptocurrency and the mystery surrounding cryptocurrency mining, to commit a massive Ponzi scheme.
Crypto system described as one of the biggest frauds in Estonia
The Estonian police and the FBI have worked closely together, with 100 police officers, including more than a dozen United States federal agents, involved in the investigation, which the head of the National Criminal Police’s Cybercrime Bureau of Estonia, Oskar Gross, described as “long and vast”. Quoted by ERR, he said:
The sheer volume of this investigation is described by the fact that it is one of the biggest fraud cases we have ever had in Estonia.
“Technology has widened the risk of fraud and before entrusting one’s money to any company or person, thorough general information gathering should be conducted,” commented State Attorney Vahur Verte, who warned people to take care of their money.
On Tuesday, local media also revealed that Potapenko and Turõgin were among the biggest donors to Estonian politician and lawmaker Raimond Kaljulaid during his campaign for a seat in the European Parliament in 2019. Kaljulaid, who received €12,500 from them, claims to have learned of their involvement only this week.
“There are many legitimate ways to turn cryptocurrencies into business, but choosing a shortcut through deception or opacity is no way to go about it,” Oskar Gross insisted. The case is not the first crypto-related crime in Estonia, ERR noted in its report. In October, Estonian police arrested suspects linked to the Dagcoin crypto investment fraud.
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