The two founders of the now-defunct cloud Bitcoin mining service HashFlare were arrested in Estonia on suspicion of participating in a $575 million crypto fraud scheme.
A cloud mining business called HashFlare was established in 2015 with the intention of enabling users to rent the company’s hashing power to mine cryptocurrencies and receive a proportionate share of the revenues.
The business was regarded as one of the top names at the time, but in July 2018, it shut down a significant section of its mining activities.
However, the entire mining operation, led by founders Sergei Potapenko and Ivan Turgin, was a part of a “multi-faceted conspiracy” that “defrauded hundreds of thousands of victims,” according to a statement from the US Department of Justice citing court records.
This includes convincing victims to sign “fraudulent equipment leasing contracts” through HashFlare and persuading more victims to make investments in a fictitious digital currency bank called Polybius Bank.
The two are also charged with planning to use 75 properties, six luxury automobiles, thousands of bitcoin mining equipment, cryptocurrency wallets, and other methods to launder their “criminal gains.”
The HashFlare founders face up to 20 years in prison if found guilty of conspiracy to commit wire fraud, 16 charges of wire fraud, and one count of conspiracy to launder money using shell businesses, fraudulent invoices, and fraudulent contracts.