Police in Estonia have arrested two men accused of a $US575 million cryptocurrency fraud, United States authorities confirm. 

Four other people living in Estonia, Belarus and Switzerland were also charged, but their identities have not been released.

Prosecutors said that, from 2015 to 2019, the suspects tricked hundreds of thousands of people into buying contracts for a cryptocurrency mining service called HashFlare and investing in a virtual currency bank called Polybius Bank.

In reality, the businesses operated as pyramid schemes, prosecutors said.

The men are accused of using shell companies to launder the fraud proceeds and to purchase real estate and luxury cars.

According to the US Justice Department, the men are in custody in Estonia pending extradition to the US.

"These defendants capitalised on both the allure of cryptocurrency, and the mystery surrounding cryptocurrency mining, to commit an enormous Ponzi scheme," Seattle US Attorney Nick Brown said.

US and Estonian authorities are working to confiscate properties and bank accounts maintained by the defendants, Mr Brown said.

Court records in Seattle did not indicate whether the men had obtained attorneys.

Some of the victims were in western Washington state, authorities said.

Cryptocurrency in turmoil:

The cryptocurrency industry has seen a fair share of volatility and turmoil this year, including a sharp decline in prices for bitcoin and other digital assets.

Earlier this month, the third-largest cryptocurrency exchange, FTX, collapsed after experiencing the crypto equivalent of a bank run.

For some, the events are reminiscent of the failures of Wall Street firms during the 2008 financial crisis, particularly now that supposedly healthy firms, such as FTX, are failing.

Source | AP