HashFlare co-founders face 10-year sentence for $400M crypto fraud scheme

Generated by AI AgentCoin World
Tuesday, Aug 12, 2025 5:22 pm ET1min read
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Aime RobotAime Summary

- Two Estonian HashFlare co-founders face 10-year prison terms after pleading guilty to $400M crypto fraud conspiracy.

- Prosecutors rejected claims of no harm, citing $400M investor losses and fabricated mining data in plea agreements.

- Case highlights U.S. crackdown on crypto fraud, following Terraform Labs founder's guilty plea in 2023.

- Defendants received deportation notices under Trump's policies, though immigration status's sentencing impact remains uncertain.

Two Estonian nationals, Sergei Potapenko and Ivan Turogin, co-founders of the now-defunct cryptocurrency mining service HashFlare, are set to be sentenced this week after entering guilty pleas to conspiracy to commit wire fraud. U.S. prosecutors have reaffirmed their recommendation for a 10-year prison term for both men, rejecting claims made by their legal representatives that no real harm was done to victims [1]. The sentencing hearing marks the culmination of a lengthy legal process that began with their extradition from Estonia in May 2024 and followed their guilty plea in February [1].

In court filings, prosecutors disputed arguments that HashFlare users did not suffer meaningful losses, pointing to a $400 million return of cryptocurrency to investors and a forfeiture agreement from 2022. They described these claims as misleading and emphasized that the victims’ experiences largely align with the harms described in the government’s case. “The harm HashFlare’s victims suffered could not be more real,” prosecutors wrote, countering claims by the defendants that an expert opinion minimized the losses [1].

Prosecutors further characterized the operation as a fraud and a Ponzi scheme, noting that the company misrepresented the availability and nature of mining contracts, leading investors to believe they had exclusive access to high-performance hardware. The plea agreement itself admitted that much of the data presented to investors, including projected earnings from mining, was fabricated [1].

The recommended 10-year sentence reflects a broader trend of heightened scrutiny and enforcement action against fraudulent activity in the cryptocurrency sector. The HashFlare case follows similar high-profile prosecutions, including the guilty plea of Terraform Labs co-founder Do Kwon in a case tied to the collapse of the

Terra
ecosystem. These developments signal that U.S. authorities are increasingly focused on holding operators of deceptive crypto ventures accountable [1].

The defendants, who have been free on bail since July 2024, also received letters from the U.S. Department of Homeland Security directing them to “self-deport,” as part of the Trump administration’s mass deportation initiative. It remains unclear whether the judge will factor immigration status into the sentencing decision [1].

As the court prepares to deliver its ruling, the HashFlare case underscores the legal and regulatory risks facing early-stage cryptocurrency projects, particularly those relying on crowdfunding or pre-sales. It also serves as a cautionary example for investors and entrepreneurs alike, highlighting the necessity of transparency and due diligence in a sector marked by rapid innovation and regulatory uncertainty [1].

Source: [1] US prosecutors double down on 10-year sentence for HashFlare co-founders (https://cointelegraph.com/news/us-prosecutors-hashflare-co-founders-sentencing-recommendation)