Two Estonian citizens arrested in $575 million cryptocurrency fraud and money laundering scheme

Sergei and Ivan Turogin were arrested in Tallin, Estonia, for their involvement in a $575 million cryptocurrency fraud and money laundering conspiracy (See source in comments)

The conspirators:

🔹 Induced victims to enter into fraudulent equipment rental contracts with a cryptocurrency mining service “HashFlare” stating that it was a “massive cryptocurrency mining operation”. 

🔹 HashFlare enabled investors to see the amount of virtual currency their mining activity has generated.

🔹 HashFlare did not have the virtual currency mining equipment it claimed to have. The equipment performed Bitcoin mining at a rate of less than one percent of the computing power it purported to have.

🔹 Additionally, the defendants induced victims to invest in a virtual currency bank called “Polybius Bank” – as they called it a digital bank. 

🔹 Although the investors were entitled to a 20% profit from the “Polybius” project, victims were never paid the promised dividends. “Polybius” was not a real bank.

🔹 The defendants used shell companies to launder the fraudulent proceeds to purchase real estate and luxury cars.

🔹 When investors asked to withdraw their mining proceeds, the defendants were not able to pay the mined currency.

🔹 The conspirators paid early investors with the money received from the later investors – what is also known as “ponzi scheme”.

The FBI calls victims to assist to the investigation.

New technology opens new doors to fraudsters and makes it easier to induce innocent victims into complex crypto scams.

Crypto asset service providers must have effective programs in place to detect fraud and potential money laundering activity of their clients and be able to cope with the fast-changing financial crime developments.


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