Gigantic fraud involving ghost Estonian bank reverberates in Belgium

Barely ten days after the fall of the trading platform FTX, confidence in the crypto world is getting a new blow. In Estonia, a mega fraud has come to light that cost savers more than half a billion dollars. The latest scandal has a Belgian link.

The essence

  • At the request of the FBI, the Estonian police this week arrested two entrepreneurs who allegedly ran a pyramid scheme around crypto coins for years.
  • According to the indictment, the two have stolen 575 million euros.
  • The two are part of the capital of Polybius, a fintech vehicle that tried to obtain a banking license in Belgium in 2018.
  • The National Bank refused to grant Polybius that license.

They did this largely through HashFlare, a platform that specialized in ‘mining’ virtual coins. You can buy Bitcoins and other cryptocurrencies on trading platforms, but you can also mine them. Then you create digital coins by having computers perform complex calculations. For this you need a lot of computing and computer power, which is not for every crypto fan. Through HashFlare, investors could rent computer capacity to mine.

According to the FBI, customers worldwide signed $550 million worth of such leases with HashFlare between 2015 and 2019. In reality, Potapenko and Turogin barely had a fraction of the mining infrastructure they promised their clients. They also made it difficult for suspicious customers to withdraw their money from the platform through falsified anti-money laundering procedures.

The FBI accuses the two Estonians of fraud and money laundering. The duo would have bought at least 75 buildings and six luxury cars with the loot, as well as thousands of machines to mine virtual money. If the two are extradited to the US and tried there, they risk 20 years in prison.

The two 37-year-old Estonians are also accused of extorting money from people through a crypto bank called Polybius. The duo launched an initial coin offering, a public sale of digital coins that raised at least $25 million. Some 26,000 people signed up for this digital capital operation, including three hundred Belgians. But Polybius never got a banking license and never paid dividends, as the company’s top had promised, the FBI says.

Brussels office

The link between Polybius and our country goes beyond the 300 Belgians who signed up for the controversial initial coin offering. About four years ago, the Estonian company announced that it was going to open an office in Brussels.

Polybius also tried to obtain a banking license here, but was denied by the National Bank. After several discussions with the top of Polybius, the regulator decided that the fintech company did not meet the conditions to obtain a banking license.

Polybius tried to obtain a banking license in Belgium, but was denied by the National Bank.

Shortly thereafter, Polybius embarked on a second life as an investment vehicle in crypto initiatives – the fraud the FBI refers to only pertains to the period before. Under the brand name Osom, Polybius launched a robot investor that allows crypto fans to automatically invest in virtual currencies via artificial intelligence. Osom also profiled itself as an investor and in September participated in the capital of the Belgian specialist for robot advice InvestSuite. The FBI’s indictment has no consequences for the Belgian company. There is also no investigation into Anton Altement, the CEO and co-founder of Polybius, who is also Osom’s top executive.