HashFlare Co-founders Plead Guilty to $550M Crypto Fraud

The co-founders of crypto mining service HashFlare, Sergei Potapenko and Ivan Turogin, have pleaded guilty to one count of conspiracy to commit wire fraud in a deal with US authorities. The Estonian nationals, who ran HashFlare, defrauded users out of more than $550 million between 2015 and 2019, and raised $25 million from investors in 2017, claiming they would establish a digital bank called Polybius, which was never created.

In a hearing held on February 12 in the US District Court for the Western District of Washington, Potapenko and Turogin pleaded guilty to one felony count out of the 18 charges they had been facing from US prosecutors. As part of the plea deal, both defendants agreed to forfeit their interests in assets that the US government froze in 2022 and to provide assistance to ensure that there would be zero financial harm to anyone. According to their defense counsel, Mark Bini of Reed Smith, Potapenko, Turogin, and HashFlare returned $350 million in crypto payments to users between 2015 and 2022.

HashFlare shut down its operations in 2019. Estonian authorities arrested Potapenko and Turogin in 2022 as part of an 18-count indictment, and after legal challenges, they were extradited to the US in May 2024. Both have been free on bail since July 2024 but could face up to 20 years in prison each after sentencing hearings scheduled for May 8.