Overview
The founders of now-defunct crypto mining firm HashFlare, Sergei Potapenko and Ivan Turõgin, have pled guilty to conspiracy to commit wire fraud, admitting their role in a $577 million Ponzi scheme that deceived hundreds of thousands of investors between 2015 and 2019.
Now, they’re asking a U.S. federal judge to spare them additional jail time, arguing their 16 months in Estonian custody, cooperation with authorities, and financial restitution efforts merit leniency. However, U.S. prosecutors are pushing for 10 years in prison, citing the massive scale and impact of their fraud.
A Classic Ponzi: Prosecutors Say
According to a sentencing memo filed by U.S. prosecutors:
- The scheme sold over $577M in fake crypto mining contracts.
- Over 440,000 victims, including 50,000 U.S. citizens, were defrauded.
- Investor returns were fabricated, and payouts were funded by new customer deposits.
- The funds supported the founders' lavish lifestyles.
“This was the largest crypto fraud case ever tried in Seattle,” said prosecutors, calling it a “horrible crime” that deserves a decade of prison as both punishment and deterrent.
The Defense: We Made Them Money
The defense painted a different picture:
- HashFlare’s customers ultimately withdrew $2.3 billion—much more than they initially invested.
- They’ve agreed to forfeit $400M in assets to reimburse victims.
- The pair cooperated fully with authorities post-arrest and pleaded guilty without a trial.
- Their 16 months in Estonian custody should count as time served.
Their legal team emphasized that most victims did not suffer long-term losses due to crypto price appreciation and that their efforts toward full restitution should be considered.
Courtroom Crossroads: Deportation and Legal Confusion
After their extradition to the U.S. in May 2024, Potapenko and Turõgin were released on bail. Yet, in April 2025, they received a conflicting letter from Homeland Security, ordering them to “deport immediately,” despite being under a U.S. court order to remain.
This conflict underscores the complexities of international crypto crime enforcement, especially when jurisdictional disputes between agencies arise.
Sentencing Ahead: August 14
The pair’s fate will be decided on August 14, 2025, when the court will balance their cooperation, restitution efforts, and time served against the severity and scale of the fraud.
Whatever the outcome, this case sets a precedent for how the U.S. handles cross-border crypto Ponzi schemes, especially when the founders are foreign nationals.
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