HashFlare Founders Avoid Additional Jail Time in $577 Million Ponzi Scheme Case

The founders of HashFlare, a cryptocurrency mining company involved in a $577 million Ponzi scheme, have managed to evade further jail time after confessing to their roles in the fraudulent scheme.

Sergei Potapenko and Ivan Turõgin have spent 16 months in custody, and Seattle Federal Court Judge Robert Lasnik decided to credit this time served in their sentencing hearings held on Tuesday.

In addition to time served, Judge Lasnik ordered each of them to pay a $25,000 fine and complete 360 hours of community service while under supervised release, which is expected to take place in their home country of Estonia.

The Department of Justice announced on Tuesday that they are contemplating whether to appeal the sentence, as prosecutors had requested a 10-year imprisonment for the duo, while Potapenko and Turõgin had requested credit for time served.

The pair were apprehended in Estonia in November 2022 and spent 16 months in custody before being extradited to the US in May 2024. They pleaded guilty to conspiracy to commit wire fraud.

Largest Fraud Case in Seattle Court’s History

Seattle prosecutors stated that this was the most significant fraud case they had ever prosecuted, a fact they emphasized heavily in advocating for a 10-year prison term for the defendants.

Judge Lasnik seemed to consider Potapenko and Turõgin’s argument that the 440,000 customers they were accused of defrauding did not experience substantial losses, as the duo forfeited over $400 million worth of assets as part of their plea agreement in February.

The founders of HashFlare also pointed out that out of the 390,000 customers who had spent $487 million on HashFlare mining contracts, $2.3 billion had been withdrawn by them since then.

HashFlare Described as a “Classic Ponzi Scheme” by Prosecutors

Prosecutors contended that between 2015 and 2019, HashFlare’s sales exceeded $577 million, presenting fake dashboards that inaccurately portrayed the firm’s mining capacity and the profits investors were supposedly earning from the operation. The scheme involved paying existing members with funds collected from new customers.

Acting US Attorney Teal Luthy Miller remarked in the DOJ’s statement, “These defendants were running a classic Ponzi scheme, involving a flashy asset: a facade of cryptocurrency mining. Similar to a traditional Ponzi scheme, they diverted millions of dollars for their personal gain, acquiring Bitcoin, real estate, luxury vehicles, expensive jewelry, and more than a dozen chartered private jet trips.”

Pair Instructed to “Self-Deport” Prior to Sentencing

Despite a court directive for Potapenko and Turõgin to remain in the US, the duo disclosed in April that they had received a letter from the Department of Homeland Security instructing them to “immediately depart the country,” leading to considerable uncertainty regarding their future, as stated by their legal representatives at that time.

The founders of HashFlare had expressed their desire to return to their homeland on multiple occasions.