Police in Estonia have apprehended men suspected of running a $575 million (£485 million) cryptocurrency scam that affected hundreds of thousands of people.
Estonian police worked with the FBI to investigate the case, and US authorities want to extradite the Estonians Sergei Potapenko and Ivan Turogin.
The two 37-year-olds allegedly convinced people to invest in HashFlare, a cryptocurrency mining service, and Polybius, a bogus virtual bank.
A federal indictment has been issued in the United States.
A statement from the US Department of Justice (DoJ) says the pair are accused of wire fraud and conspiracy to commit money laundering – crimes punishable by up to 20 years in prison.
The defendants have appeared in court in the Estonian capital Tallinn and are being held pending extradition to the US, the statement says.
There was no immediate comment from their representatives.
Giving details of the alleged scheme, the DoJ says the two defrauded victims by offering them the chance to buy into HashFlare’s cryptocurrency mining operations.
Crypto mining uses computers to generate virtual coins for profit – a process that consumes significant amounts of computing power.
Customers around the world are said to have purchased more than half a billion dollars’ worth of HashFlare contracts from 2015 to 2019. But the operation allegedly overstated its capabilities.
The DoJ alleges that victims were also promised dividends if they invested in Polybius, a virtual bank Mr Potapenko and Mr Turogin said they had set up.
The defendants are said to have raised $25m this way – but no bank was ever formed.
They used shell companies to launder criminal proceeds, buying at least 75 properties and luxury cars, DoJ says.
Oskar Gross of Estonia’s police cybercrime bureau described the joint investigation – which involved 100 personnel including 15 from the American side – as “long and vast”.
It was “one of the largest fraud cases we’ve ever had in Estonia”, he said on Monday, quoted by Estonia’s ERR news agency.
The country’s authorities also warned that technology had “broadened the risk of fraud”.
The case comes at a time of heightened nervousness in the cryptocurrency market, following the collapse of the world’s second-largest crypto exchange, FTX.
The firm filed for bankruptcy in the US last week, and owes its 50 largest creditors almost $3.1bn (£2.6bn), according to a court filing.