JVTech News Bitcoin: After €556 million scam, these fake crypto-miners must now be held accountable
By exploiting the ignorance of over 100,000 customers about cryptocurrency mining, these two scammers pulled off the heist of the century. Except that, after several years on the run, the two criminals have finally been arrested and will have to pay off their debt of over 556 million euros.
Hashflare: The Established Crypto Scam
The case is not new. In 2015 two scammers named Sergei Potapenko and Ivan Turõgin founded the cryptocurrency mining company: Hashflare.
Concretely, this company offered a “Cloud mining” service, allowing the customer to rent the computing power held by Hashflare to indirectly mine bitcoin and other proof-of-stake (PoW) cryptocurrencies. So, at the beginning of the cryptocurrency era, the company very quickly managed to make headlines with its attractive mining offers.
However, there was nothing…. In fact, the multiple customers rented dummy mining machines. Like a real Ponzi, Hashflare was able to work for almost 4 years, scamming hundreds of thousands of customers until 2019.
By leasing this fake mining equipment, the two Estonians embezzled as much as $550 million. Furthermore, this scam was not the only one that was profitable. The scammers had even founded Polybius Bank, a fake crypto bank, which earned them an extra $25 million. In total, in these 4 years, the two scammers managed to extort 575 million dollars (556 million euros at current prices).
Once this money was laundered through fake companies, the two men had a good life, buying villas, sports cars, etc. Only that today the scammers will have to explain…
Fake bitcoin miners, finally stopped
Despite warnings to authorities, it took several years for the justice system to hear Hashflare’s case. After several years on the run, the two protagonists were finally arrested in Tallinn, the capital of Estonia.
The news was announced by the US Department of Justice in a statement released on Nov. 21. Fake crypto-miners are targeted on 18 counts where we specifically find “money laundering” and “cryptocurrency fraud”.
In this trial, the two 37-year-old men currently face up to 20 years in prison. This reassuring news reflects a major breakthrough in this type of investigation.
“New technologies have made it easier for malicious actors to take advantage of innocent victims – both in the United States and abroad – in increasingly complex scams. The department is committed to preventing the public from losing any more hard-earned money to these scams and will not allow these defendants, or others, to keep the fruits of their crimes,” the Attorney General said. Department of Justice. Kenneth A. Gentile, Jr.
The cryptocurrency industry is still young and developing day by day, so it has been the scene of unprecedented scams. Some of these bad guys never cared as the justice system was unaware of this type of 3.0 scams.