Founders of HashFlare and Polybius Bank Accused of Laundering $575 Million

Detained in Tallinn on charges of fraud and money-laundering tied to $575 million.

On November 20, Tallinn police, acting at the request of the FBI, detained the founders of the cloud-mining service HashFlare and the digital bank Polybius Bank, Sergey Potapenko and Ivan Turigin. They are charged with conspiracy to commit fraud and money laundering involving $575 million, according to the Минюст США.

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According to court documents, the 37-year-old Estonian nationals, through their companies, built financial pyramids in which investors were deceived.

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To HashFlare clients, Potapenko and Turigin offered to rent mining capacity, promising to pay a share of profits. In reality, the company did not have the announced equipment volume, and the hashrate figure was less than 1% of the stated. Instead of payouts from mining, the HashFlare founders sent investors assets purchased on the open market.

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The project ceased operations in 2019. Between 2015 and 2019, clients from around the world signed contracts with the company worth more than $550 million.

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From May 2017, Potapenko and Turigin began promoting the concept of the Polybius Bank digital bank, supposedly aimed at cryptocurrency market participants. The money was also raised with a promise of dividends from profits, but the bank never launched. This scheme generated at least $25 million for the accused.

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Subsequently, Potapenko and Turigin, through shell companies, moved the proceeds to various bank accounts and cryptocurrency wallets. They acquired no fewer than 75 properties, six luxury cars, and thousands of mining devices. U.S. and Estonian authorities are working to seize these assets.

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Under the charges, Potapenko and Turigin face up to 20 years in prison.

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In response to the news, Polybius’s token (PLBT) plummeted more than 50%, according to CoinMarketCap. The daily trading volume stood at just over $33,000, with the bulk of activity on decentralized exchanges.

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In July 2018, HashFlare’s cloud-mining service halted servicing contracts, allegedly due to unprofitability.

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As of early February 2017, according to manager Vitaly Pavlov, the company had 484,395 registered users and 456,932 contracts.

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Created in the same period, Polybius Bank, according to the announcement, planned to provide loans secured by cryptocurrencies, form investment portfolios based on digital assets, and conduct identity verification on the basis of blockchain.

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