Security News > 2022 > November > Two Estonians arrested for running $575M crypto Ponzi scheme
Two Estonian nationals were arrested in Estonia, on Sunday, after being indicted in the U.S. for running a massive cryptocurrency Ponzi scheme that led to more than $575 million in losses.
Starting in December 2013, they ran a company named HashCoins OÜ that imported and assembled other companies' cryptocurrency mining hardware instead of manufacturing its own, as advertised.
After failing to deliver equipment paid in advance and to avoid refunding payments, the defendants tricked customers who had already paid for mining hardware into signing up for remote mining contracts through a new cryptocurrency mining service they called HashFlare.
Those who agreed to the scheme were promised to receive "Rights under mining contracts entitling the customer to a percentage of profits" from a pooled remote mining operation, according to the indictment.
"To conceal this fact, when investors submitted requests to withdraw their mining proceeds, defendants either resisted making payments or paid off the investors using virtual currency defendants had simply purchased on the open market, as opposed to currency generated by genuine mining operations," court documents say.
"The size and scope of the alleged scheme is truly astounding. These defendants capitalized on both the allure of cryptocurrency, and the mystery surrounding cryptocurrency mining, to commit an enormous Ponzi scheme," said U.S. Attorney Nick Brown.