Co-Founders of Hashflare Plead Guilty in Massive Crypto Fraud Case
The co-founders of Hashflare, a notorious cryptocurrency mining Ponzi scheme that defrauded investors of approximately $577 million globally, entered guilty pleas on Wednesday for conspiracy to commit wire fraud. The two Estonian nationals, Sergei Potapenko and Ivan Turõgin, both aged 40, were apprehended in Estonia in November 2022 and subsequently extradited to the United States, where they faced an 18-count indictment.
In court, both Potapenko and Turõgin admitted to one count each of conspiracy to commit wire fraud, a crime that carries a maximum penalty of 20 years in prison. The fraudulent activities spanned from 2015 to 2019, during which the pair convinced investors to rent a share of their purported crypto mining operations, offering a return based on the cryptocurrency generated by Hashflare. However, court documents revealed that the reality was starkly different; Hashflare possessed less than 1% of the mining power it claimed to own.
As investors sought to withdraw their earnings, prosecutors allege that Potapenko and Turõgin employed various excuses to delay or deny payments. In some instances, they compensated investors using cryptocurrency purchased from external sources rather than from the alleged mining operations.
In a defense statement, the attorneys representing Potapenko and Turõgin contended that none of Hashflare’s investors experienced any financial loss. They emphasized that the only crime committed was misrepresenting the scale of Hashflare’s mining capabilities. “Ivan and Sergei operated successful businesses that provided legitimate services, employed nearly 100 individuals in Estonia, and engaged in charitable activities,” stated Andrey Spektor, a partner at Norton Rose Fulbright US LLP, who serves as counsel for Turõgin. “As Ivan acknowledged in court, while they promised to mine crypto and did engage in mining, the output was not as extensive as advertised; they occasionally repaid clients using crypto sourced from the open market.”
According to the indictment, Potapenko and Turõgin misappropriated their victims’ funds to finance numerous real estate ventures and acquire luxury vehicles. Under the terms of their plea agreement, both men have consented to forfeit assets exceeding $400 million, funds that will be allocated to reimburse defrauded investors.
The sentencing for Potapenko and Turõgin is scheduled for May 8 in a Seattle court. The case serves as a stark reminder of the risks associated with cryptocurrency investments and the potential for fraudulent schemes in the rapidly evolving digital currency landscape.
