Estonia to Extradite HashFlare and Polybius Bank Founders to the US

The Estonian government has decided to extradite the founders of the cloud mining service HashFlare and the digital bank Polybius Bank, Sergei Potapenko and Ivan Turygin, to the United States, reports Postimees.

The entrepreneurs were detained by Tallinn police on November 20, 2022, at the request of the FBI. The US Department of Justice has charged them with 18 counts, including cryptocurrency fraud amounting to $575 million and money laundering.

According to court documents, Potapenko and Turygin created financial pyramids through their companies, deceitfully attracting investors.

The accused offered HashFlare clients the opportunity to rent mining capacities, promising to pay a percentage of the profits. In reality, the company did not possess the announced volume of equipment, and the hash rate was less than 1% of what was claimed. Instead of payments from cryptocurrency mining, the service’s founders sent investors assets purchased on the open market.

The project ceased operations in 2019. From 2015 to 2019, clients worldwide entered into contracts with the company totaling over $550 million.

From May 2017, Potapenko and Turygin began promoting the concept of the digital bank Polybius Bank, supposedly aimed at participants in the cryptocurrency market. Funds were also raised with the promise of paying dividends from profits, but the bank was never launched. The scheme brought the accused at least $25 million.

The funds obtained were funneled by Potapenko and Turygin through shell companies to various bank accounts and cryptocurrency wallets.

They face up to 20 years in prison on the combined charges.

The publication noted that this is the second extradition decision by the authorities. The first, made in September 2023, was overturned by the Tallinn Circuit Court in November. One of the reasons was that the government had not examined the conditions of detention in the US.

This time, the Estonian Ministry of Justice concluded that there is sufficient evidence to ensure the rights of the two Estonian citizens are respected upon their transfer to the United States.

Earlier, VSquare experts, during an investigation, discovered dozens of cases of fraud, money laundering, sanctions evasion, and illegal financing of criminal organizations through cryptocurrency companies registered in Estonia.