wire fraud

Crypto Twitter explodes over the news of Sam Bankman-Fried’s arrest

US politicians, crypto execs and influencers fired up their Twitter apps upon learning that Sam Bankman-Fried was in custody in the Bahamas.

Crypto Twitter has blown up over the shocking news of Sam Bankman-Fried’s arrest in the Bahamas, with many surprised it had occurred so quickly. 

On Dec. 12, the disgraced FTX founder was arrested by the Royal Bahamas Police after they received notification that the United States government had filed criminal charges against him.

Within hours, politicians, crypto executives and influencers had all booted up their Twitter apps to comment on the arrest of the former CEO.

New York Democratic Representative Alexandria Ocasio-Cortez, who’s held a fairly neutral view on the crypto industry to date, told her 13.4 million Twitter followers that Bankman-Fried’s was a step  toward “justice being served,” but noted that the arrest would postpone Bankman-Fried’s testimony before the House Financial Services Committee, which was scheduled for Dec. 13.

U.S. Senator Cynthia Lummis was also pleased, tweeting that prosecutors made the right decision to hold Bankman-Fried accountable for the “good, old-fashioned fraud” he allegedly committed.

Fellow U.S. senator and crypto skeptic Elizabeth Warren agreed, stating in a Dec. 13 tweet to her 7 million followers that the U.S. Department of Justice needs to hold more lawbreaking corporate executives accountable.

Others took the opportunity to make light of it all. Benjamin Cowen, the chief executive and founder of the crypto-analysis channel called Into The Cryptoverse, used ChatGPT to create poetry about Bankman-Fried’s latest predicament.

Meanwhile, memes are already making the rounds on Twitter:

Much is also being said about Bankman-Fried’s Twitter posts and media appearances since FTX’s stunning collapse in November.

The co-host of Not Investment Advice, Trung Phan, told his 538,000 Twitter followers on Dec. 13 that Bankman-Fried’s erratic public behavior will make life harder for his defense attorney, while others believe that Bankman-Fried’s arrest will likely see him pointing the finger at colleagues and people linked to the FTX debacle, including those that received his sizeable political donations.

Related: BF tried to destabilize crypto market to save FTX: Report

In what is likely his last Twitter Spaces interview, with Unusual Whales on Dec. 12, Bankman-Fried stated “I don’t think I’ll be arrested” when pressed about the possibility.

The Royal Bahamas Police Force made the arrest following the formal notification from the U.S. that it has filed criminal charges against Bankman-Fried, according to a Dec. 12 announcement by the Bahamas’ Office of the Attorney General.

HashFlare founders arrested in ‘astounding’ $575M crypto fraud scheme

The HashFlare founders have been charged for their alleged involvement in a crypto fraud and money laundering conspiracy.

The two founders of the now-defunct Bitcoin cloud miner HashFlare have been arrested in Estonia over their alleged involvement in a $575 million crypto fraud conspiracy.

HashFlare was a cloud mining company created in 2015, which purported to allow customers to lease the company’s hashing power in order to mine cryptocurrencies and gain an equivalent share of its profits.

The company was seen as one of the leading names in the business at the time, but shut down a large portion of its mining operations in Jul. 2018. 

However, according to a statement from the United States Department of Justice citing court documents, the entire mining operation, run by founders Sergei Potapenko and Ivan Turõgin, was part of a “multi-faceted scheme” that “defrauded hundreds of thousands of victims.” 

This included convincing victims to enter into “fraudulent equipment rental contracts” through HashFlare and persuading other victims to invest in a fake virtual currency bank called Polybius Bank.

The pair is also accused of conspiring to launder their “criminal proceeds” through 75 properties, six luxury vehicles, cryptocurrency wallets, and thousands of cryptocurrency mining machines.

U.S. Attorney Nick Brown for the Western District of Washington called the size and scope of the alleged scheme “truly astounding.”

“These defendants capitalized on both the allure of cryptocurrency and the mystery surrounding cryptocurrency mining, to commit an enormous Ponzi scheme,” he said.

The HashFlare founders have been charged with conspiracy to commit wire fraud, 16 counts of wire fraud, and one count of conspiracy to commit money laundering using shell companies and fraudulent invoices and contracts, and could face up to 20 years in prison if convicted. 

HashFlares’ parent company HashCoins OU was founded by Potapenko and Turõgin in 2013, while HashFlare launched mining services in 2015. It initially offered contracts for SHA-256 (Bitcoin) and scrypt. ETHASH (ETH), DASH, and ZCASH options followed.

According to the indictment, the pair claimed HashFlare was a “massive cryptomining operation,” however, it’s alleged the company was mining at a rate of less than 1% of what it claimed, and was paying out withdrawals by purchasing Bitcoin (BTC) from third parties, rather than gains from mining operations.

By Jul. 2018, HashFlare announced a halt to BTC mining services, citing difficulty generating revenue amid market fluctuations.

Customers were not reimbursed for the remainder of the annual contract fees, which they had paid upfront. Other crypto assets available in the platform’s portfolio continued to operate as normal.

Allegations of the company being fraudulent were made but never proven in an official capacity.

Related: Russian bill would legalize crypto mining, sales under ‘experimental legal regime’

The last public communication from HashFlare came through in 2019 through an Aug. 9 post where they announced they were suspending the sale of ETH contracts because the “current capacity has been sold out.”

The company promised to resume activities in the “very near future” and teased further announcements, but nothing was ever publically disclosed about what had happened and HashFlare quietly disappeared.

The FBI is now investigating the case and is seeking information from customers who opted into the alleged fraudulent schemes of HashFlare, HashCoins OU and Polybius.

The 18-count indictment for Potapenkos and Turõgins alleged involvement was returned by a grand jury in the Western District of Washington on Oct. 27 and unsealed on Nov. 21.

HashFlare founders arrested in ‘astounding’ $575M crypto fraud scheme

The HashFlare founders have been charged for their alleged involvement in a crypto fraud and money laundering conspiracy.

The two founders of the now-defunct Bitcoin cloud miner HashFlare have been arrested in Estonia over their alleged involvement in a $575 million crypto fraud conspiracy.

HashFlare was a cloud mining company created in 2015, which purported to allow customers to lease the company’s hashing power in order to mine cryptocurrencies and gain an equivalent share of its profits.

The company was seen as one of the leading names in the business at the time but shut down a large portion of its mining operations in July 2018. 

However, according to a statement from the United States Department of Justice citing court documents, the entire mining operation, run by founders Sergei Potapenko and Ivan Turõgin, was part of a “multi-faceted scheme” that “defrauded hundreds of thousands of victims.”

This included convincing victims to enter into “fraudulent equipment rental contracts” through HashFlare and persuading other victims to invest in a fake digital currency bank called Polybius Bank.

The pair is also accused of conspiring to launder their “criminal proceeds” through 75 properties, six luxury vehicles, cryptocurrency wallets and thousands of cryptocurrency mining machines.

U.S. Attorney Nick Brown for the Western District of Washington called the size and scope of the alleged scheme “truly astounding.”

“These defendants capitalized on both the allure of cryptocurrency and the mystery surrounding cryptocurrency mining, to commit an enormous Ponzi scheme,” he said.

The HashFlare founders have been charged with conspiracy to commit wire fraud, 16 counts of wire fraud and one count of conspiracy to commit money laundering using shell companies and fraudulent invoices and contracts, and could face up to 20 years in prison if convicted. 

HashFlares’ parent company HashCoins OU was founded by Potapenko and Turõgin in 2013, while HashFlare launched mining services in 2015. It initially offered contracts for SHA-256 Bitcoin (BTC) and scrypt. ETHASH Ether (ETH), Dash (DASH) and Zcash (ZEC) options soon followed.

According to the indictment, the pair claimed HashFlare was a “massive cryptomining operation.” However, it’s alleged the company was mining at a rate of less than 1% of what it claimed and was paying out withdrawals by purchasing Bitcoin from third parties rather than gains from mining operations.

By July 2018, HashFlare announced a halt to BTC mining services, citing difficulty generating revenue amid market fluctuations.

Customers were not reimbursed for the remainder of the annual contract fees, which they had paid upfront. Other crypto assets available in the platform’s portfolio continued to operate as normal.

Allegations of the company being fraudulent were made but never proven in an official capacity.

Related: Russian bill would legalize crypto mining, sales under ‘experimental legal regime’

The last public communication from HashFlare came through in 2019 through an Aug. 9 post, where they announced they were suspending the sale of ETH contracts because the “current capacity has been sold out.”

The company promised to resume activities in the “very near future” and teased further announcements, but nothing was ever publically disclosed about what had happened and HashFlare quietly disappeared.

The FBI is now investigating the case and is seeking information from customers who opted into the alleged fraudulent schemes of HashFlare, HashCoins OU and Polybius.

The 18-count indictment for Potapenkos and Turõgins alleged involvement was returned by a grand jury in the Western District of Washington on Oct. 27 and unsealed on Nov. 21.