HashFlare Founders Seek No Additional Jail Time After 16 Months Detention

Sergei Potapenko and Ivan Turõgin, co-founders of the now-defunct cryptocurrency mining platform HashFlare, have asked a U.S. federal judge to avoid imposing any additional prison time beyond the 16 months they have already spent in pre-trial detention. The request came in a sentencing memo filed on Wednesday in the Seattle court of Judge Robert Lasnik [1]. The two men pleaded guilty in May 2024 to conspiracy to commit wire fraud, following a multi-year investigation into HashFlare’s operations, which prosecutors describe as a $577 million Ponzi scheme [2].

U.S. prosecutors, however, are pushing for a decade in prison for each of the founders, calling the case the largest fraud the court has ever tried. They argue the scheme caused approximately $300 million in victim losses and was driven by a “lavish lifestyle” funded by investor funds. According to their sentencing submission, Potapenko and Turõgin systematically overpromised returns, used funds from new customers to pay out older ones, and misrepresented the scale of their mining operations [1].

In contrast, the defense argues that customers of HashFlare, numbering over 390,000, have collectively withdrawn more than $2.3 billion in cryptocurrency. This, they claim, suggests that many investors did not suffer the kind of financial losses prosecutors allege. The defense also emphasized that the founders have cooperated with authorities, and their extradition from Estonia to the U.S. in May 2024 was a significant step in the justice process [1].

A key point of contention is whether the sentence should reflect the scale of the crime or the mitigating factors presented by the defense. Prosecutors stress that the nature of the fraud required a “serious” sentence to deter future misconduct in the crypto sector. They also rejected the idea that the Estonian court, which initially held the defendants, was the appropriate venue, noting that more than 50,000 of HashFlare’s customers were based in the U.S. [1].

Meanwhile, Potapenko and Turõgin have also raised the possibility of deportation to Estonia, despite a court order keeping them in the U.S. for sentencing. They claimed to have received a conflicting directive from the U.S. Department of Homeland Security to “deport immediately,” which has created legal ambiguity about their next steps [1].

The case highlights the increasing scrutiny of crypto businesses that operate without clear regulatory frameworks. It follows a pattern seen in other high-profile cases, such as that of Tornado Cash co-founder Roman Storm, who also faces potential prison time for running an unlicensed service [2].

The sentencing hearing is scheduled for August 14, and the outcome could set a precedent for how U.S. courts handle similar cases involving cross-border crypto fraud. For now, the debate continues over what constitutes a just punishment for a crime that straddles digital innovation, financial deception, and regulatory uncertainty.

Source:

[1] HashFlare Founders Want Time Served As US Asks For 10 ...

https://cointelegraph.com/news/hashflare-founders-want-time-served-us-wants-10-years-prison

[2] BTCUSD - HashFlare founders want no more jail time as US ...

https://mx.advfn.com/bolsa-de-valores/COIN/BTCUSD/crypto-news/96580762/hashflare-founders-want-no-more-jail-time-as-us-as

[3] BTCUSD - Tornado Cash co-founder found guilty in partial ...

https://mx.advfn.com/bolsa-de-valores/COIN/BTCUSD/crypto-news/96577100/tornado-cash-co-founder-found-guilty-in-partial-ve