US court begins trial of defendants in $575 million HashFlare cryptocurrency mining fraud

On May 31st, according to a press release from the US Department of Justice (DOJ), Estonian citizens Sergei Potapenko and Ivan Turõgin appeared in court for the first time yesterday on charges related to cryptocurrency fraud. They were previously accused in the Western District of Washington of operating the fraudulent cryptocurrency mining service HashFlare from 2015 to 2019, tricking hundreds of thousands of victims into investing over $550 million but failing to deliver on promised mining shares. In another scheme in May 2017, Potapenko and Turõgin raised at least $25 million by investing in Polybius, claiming the company would establish a virtual currency bank. Although Polybius promised to distribute profits, the bank was never established and most of the funds were reportedly transferred to accounts controlled by the defendants.

The DOJ further alleges that the two men laundered money through shell companies, fake contracts, and invoices to purchase 75 pieces of real estate, six luxury cars, cryptocurrency wallets, and thousands of mining machines. They face charges of conspiracy to commit wire fraud, 16 counts of wire fraud, and conspiracy to commit money laundering, with each charge carrying a maximum penalty of 20 years in prison.