HashFlare founders guilty of $577M fraud seek lighter sentences amid customer gains

HashFlare founders Sergei Potapenko and Ivan Turõgin have pleaded guilty to wire fraud and are now seeking leniency in their sentencing, arguing that many customers profited from their investments despite the fraudulent nature of the $577 million Ponzi scheme [1]. Prosecutors, however, have recommended a 10-year prison sentence for the duo, emphasizing the scale of the fraud, which affected 440,000 customers and allegedly caused over $300 million in losses [2]. They described the case as a “horrible crime” that used funds from new investors to pay returns to earlier ones, with the founders reportedly using proceeds to support “lavish lifestyles” [3].

According to the defense, 390,000 customers who invested $487 million in HashFlare mining contracts withdrew $2.3 billion, far exceeding their initial investments, largely due to the rise in cryptocurrency prices after the scheme ended [4]. Potapenko and Turõgin claim that this growth minimized the financial harm to customers, contradicting prosecutors’ assertions of widespread losses. The founders also noted that they have forfeited over $400 million in assets as part of their plea deal in February, which will be used to reimburse victims [5].

The legal battle has also extended to the issue of deportation. Despite a U.S. court order requiring them to remain in the country, the founders say they received a letter from the Department of Homeland Security urging their immediate deportation to Estonia, where they are from [6]. This has created legal uncertainty and raises broader questions about how U.S. courts handle foreign nationals in cross-border crypto-related crimes.

The case highlights the complexities of crypto fraud, where the interplay of market forces can obscure the damage caused by fraudulent schemes. While prosecutors stress the need for a strong sentence to serve as a deterrent, the defense argues that customer gains reduce the moral and legal culpability of the founders [7]. As the court prepares to determine the final sentence, the outcome could set an important precedent for similar cases in the rapidly evolving crypto sector [8].

Sources:

[1] https://en.coinotag.com/hashflare-founders-seek-leniency-in-sentencing-amid-claims-of-customer-gains-despite-577-million-ponzi-scheme/