DHS Orders Crypto Ponzi Scheme Founders to Self-Deport

In a surprising turn of events, the U.S. Department of Homeland Security (DHS) mistakenly ordered the two Estonian founders of HashFlare, Sergei Potapenko and Ivan Turogin, to self-deport just four months before their scheduled sentencing for operating a $577 million cryptocurrency mining Ponzi scheme. This directive contradicted a court order that required the men to remain in Washington state until their sentencing in August.

Lawyers for Potapenko and Turogin informed District Judge Robert Lasnik of the Western District of Washington in a joint letter that both men had received alarming communications from dhs instructing them to leave the country immediately. The email, dated April 11, stated, “It is time for you to leave the United States. DHS is terminating your parole. Do not attempt to remain in the United States - the federal government will find you. Please depart the United States immediately.” The email also threatened the men with “criminal prosecution, civil fines, and penalties and any other lawful options available to the federal government” if they stayed in the country.

This situation is particularly ironic given that Potapenko and Turogin were extradited from Estonia at the request of the U.S. Department of Justice in 2022. They were indicted on an 18-count indictment related to their HashFlare scheme. Initially, they pleaded not guilty to all charges, but in February, they both pleaded guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison. They agreed to forfeit over $400 million in assets and have been in the Seattle area on bond since last July.

Mark Bini, a partner at Reed Smith LLP and lead counsel for Potapenko, highlighted in the joint letter to the court that the DHS’s emails had caused both men significant anxiety. Bini noted that while Potapenko and Turogin would prefer to return home immediately, they understood their obligation to remain in King County as per the court order. Bini also mentioned that recent news reports have shown that immigration authorities can make mistakes, leading to individuals being detained or deported erroneously.

Six days after Bini’s letter to the judge, the Department of Justice (DOJ) filed its own letter with the court, stating that prosecutors had coordinated with DHS’s Homeland Security Investigations (HSI) division to secure a year-long deferral to the self-deportation order. This deferral is intended to provide ample time for the sentencing to take place. Potapenko and Turogin are scheduled to be sentenced on August 14 in Seattle. Their lawyers have indicated that they will request to be sentenced to time served, meaning no additional time in prison, and to be sent home to Estonia immediately.