HashFlare Founders Seek Credit for Time Served as US Seeks 10-Year Sentences

Sergei Potapenko and Ivan Turõgin, the co-founders of the now-defunct cryptocurrency mining platform HashFlare, have requested a U.S. federal court to credit them for the time they have already served in custody and to avoid any additional prison time. The pair pleaded guilty to conspiracy to commit wire fraud, having orchestrated what prosecutors describe as a $577 million Ponzi scheme between 2015 and 2019 [1]. The U.S. Department of Justice, however, has recommended a 10-year prison sentence for each defendant, arguing that the fraud caused approximately $300 million in victim losses [2].

According to court filings, Potapenko and Turõgin were arrested in Estonia in November 2022 and remained in custody there for 16 months before being extradited to the U.S. in May 2024. They were released on bail and are scheduled to appear for sentencing on August 14 [1]. In their joint sentencing memo, the defendants emphasized their cooperation with investigators and claimed that customers of HashFlare ultimately received more than $2.3 billion in crypto returns, far exceeding their initial $487 million in investments [1]. They further argued that all victims will be made whole through the $400 million in assets forfeited as part of their plea agreement [1].

In contrast, prosecutors have painted a far harsher picture of the scheme, calling it the “largest fraud the court has ever tried” and emphasizing the “lavish lifestyles” funded by the scheme. They described the fraud as a classic Ponzi structure, where early investors were paid out with funds from new ones. Prosecutors also dismissed the idea that the case should have been handled in Estonia, noting that over 50,000 of the 440,000 victims were U.S. residents who collectively invested more than $130 million [1]. The U.S. position is clear: the sentence must serve as a deterrent for future fraud in the crypto space.

The founders’ legal team has also sought deportation to their native Estonia, despite a court order requiring them to remain in the U.S. The Department of Homeland Security reportedly sent them a deportation directive in April, creating confusion about their legal status and future. While their request to be deported suggests a strategic legal move, it also raises broader questions about how U.S. courts handle foreign nationals in transnational crypto crime cases [1].

This case is emblematic of the increasing scrutiny the U.S. is applying to crypto entrepreneurs who fail to comply with financial regulations. The Department of Justice has signaled its intent to pursue aggressive sentencing for white-collar crimes involving digital assets, with HashFlare being one of the most high-profile cases in this trend. The outcome of the sentencing hearing will be closely watched, not only for its legal implications but also for what it says about the evolving regulatory landscape in the crypto sector [2].

Sources:

[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