Founders of HashFlare arrested in $575M crypto fraud

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Founders of HashFlare arrested in $575M crypto fraud

The founders of HashFlare have been charged with alleged involvement in crypto fraud and money laundering. A fraud involving $575 million has been committed by two founders of HashFlare, a now-defunct cloud computing company.

When the company was founded in 2015, it was a leader in its industry, but in July 2018, a large part of its mines were shut down. Nevertheless, the US Department of Justice stated that the entire mining operation was part of a "multiple scheme" with many victims, citing court documents.

HashFlare used this method of persuasion to convince victims to sign "fake equipment rental contracts" and convince other victims to invest in Polybius Bank, a fake virtual currency bank. Thousands of cryptocurrency mining machines, six luxury vehicles, 75 properties, and crypto wallets are also alleged to have been used by the pair to earn "criminal profits."

A United States Attorney for the Western District of Washington, Nick Brown, described the alleged fraud as "truly staggering" in scale and scope. “These defendants capitalized on both the allure of cryptocurrency and the mystery surrounding cryptocurrency mining, to commit an enormous Ponzi scheme,” Brown said.

Case under FBI investigation

A process server company, shell companies, fake invoices, and contracts were used by HashFlare's founders to commit online fraud and money laundering. If convicted, they could face up to 20 years in prison.

HashFlare was alleged to be a massive crypto mining operation in the indictment. A report suggests that the company actually mined about 1% of what it claimed and paid out bitcoins by buying them from third parties, not mining profits.

Due to market fluctuations, HashFlare suspended BTC mining services by July 2018. Customers didn't receive a refund for the remainder of their annual contract fees. There was no effect on other crypto assets within the platform's portfolio.

Although the company has been claimed to be fake, this has never been proven. In 2019, HashFlare announced they were suspending ETH contract sales due to "current capacity being sold out" However, no information as to what happened or when HashFlare would resume operations was made public.

HashFlare, HashCoins OU, and Polybius are now under investigation by the FBI, and the bureau is seeking information from customers who participated in the alleged fraudulent schemes.