"Crypto Ponzi Kings Plead Guilty: $577M Scheme Unravels"

The U.S. Attorney's Office for the Western District of Washington has secured a significant victory in its ongoing crackdown on crypto-related fraud. Two Estonian nationals, Sergei Potapenko and Ivan Turõgin, both 40, have pleaded guilty to conspiracy to commit wire fraud, admitting to operating a $577 million crypto Ponzi scheme through their company, HashFlare.

HashFlare sold fraudulent crypto mining contracts, promising high returns to investors. However, the defendants lacked the necessary computing power to fulfill their promises. Instead, they used falsified data on their platform to create the illusion of success. The scheme ran from 2015 to 2019, with total sales exceeding $577 million.

As part of their plea agreement, Potapenko and Turõgin have agreed to forfeit assets, including real estate, luxury vehicles, and crypto accounts. The U.S. Attorney's Office has secured $400 million in asset forfeiture. The defendants now face up to 20 years in prison for their crimes, with sentencing scheduled for May 8.

The two men also admitted to running another fraudulent operation, Polybius, an Initial Coin Offering (ICO) for a digital bank project that raised approximately $31 million in 2017. The funds raised through Polybius were never invested in the bank, and no dividends were ever paid to investors. Instead, the defendants used a large portion of the proceeds for their own personal benefit.

The U.S. Attorney's Office alleges that the defendants laundered the fraud proceeds through at least 75 properties, six luxury vehicles, crypto wallets, and thousands of crypto mining machines. The FBI's Seattle Field Office played a key role in the investigation, working with international law enforcement agencies to apprehend and extradite the defendants from Estonia.

The guilty plea and the forfeiture are part of a broader effort by U.S. authorities to hold crypto operators accountable for fraudulent activities. This follows significant actions taken earlier in 2024, including a record-breaking $1.51 billion in fines, with the majority coming from the global crypto exchange Binance, which was penalized in a $4.3 billion settlement for violating U.S. regulations.