HashFlare Founders Arrested Over Involvement In $575M Crypto Fraud
A law enforcement agency has arrested the founders of HashFlare, a now-defunct crypto cloud miner in Estonia. According to reports, the founders were reportedly involved in a $575 million cryptocurrency fraud.
Founded in 2015, HashFlare, a cloud mining firm, allowed users to lease its hashing power. Thus, users can mine digital currencies and receive a portion of the profit.
Then, the company was among the top leading businesses. However, the company shut down mining operations in July 2018.
According to the United States Department of Justice (DoJ), the whole mining operation was part of a large crypto fraud scheme. The organization run by Ivan Turõgin and Sergei Potapenko defrauded thousands of Investors.
They convinced victims to invest in fraudulent crypto mining equipment rental. Also, they persuaded other users to invest in Polybius Bank. It turns out that Polybius Bank is a fake crypto bank.
Additionally, the founders allegedly conspired to launder the funds from the scheme through several means. For example, they bought over six luxury cars, 75 properties, and several crypto-mining machines.
The statement also revealed that they distributed their criminal proceeds across various crypto wallets. Nick Brown, the U.S. Attorney for Washington DC, noted that the scheme’s scope is “astounding.”
“The defendants took advantage of the attraction of the crypto sector and crypto mining to orchestrate a large Ponzi scheme,” Brown stated.
According to reports, both founders are charged with 16 counts of wire fraud and conspiracy to carry out wire fraud. They are also accused of money laundering using fraudulent contracts, invoices, and shell companies.
US FBI Investigating The Case
If convicted of their crimes, both founders could face a jail term of about 20 years. In 2013, Turõgin and Potapenko founded HashCoins OU, HashFlares’ parent firm.
HashFlare began offering crypto mining services in 2015. Initially, the company provided contracts for BTC while ZCASH, DASH, and ETHASH options followed.
By July 2018, HashFlare paused its Bitcoin mining services. The company cited market fluctuations and difficulty in generating revenue as reasons for this move.
Meanwhile, the last public statement from the mining firm was on August 9th, 2019. After that, the company announced the suspension of ETH contract sales.
According to the post, the company had sold out all its current capacity. However, the mining firm assured users that it would resume operations soon.
Yet, there was little explanation for why HashFlare had closed down. The Federal Bureau of Investigation (FBI) is presently investigating the situation. The agency is also collecting information from users who were victims of the fraudulent schemes of Polybius, HashCoins OU, and HashFlare.
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