HashFlare Founders Seek Time Served as US Pursues 10-Year Sentences

Sergei Potapenko and Ivan Turõgin, co-founders of the defunct cryptocurrency mining service HashFlare, have requested that a U.S. court refrain from imposing additional prison time beyond the 16 months they served in Estonian custody prior to extradition. They were extradited to the U.S. in May 2024 and have since pleaded guilty to conspiracy to commit wire fraud. The U.S. Department of Justice, however, is seeking a 10-year prison sentence for each, citing the scale and impact of what it describes as a $577 million Ponzi scheme [1].

In a sentencing memo submitted to Judge Robert Lasnik of the U.S. District Court in Seattle, prosecutors emphasized that HashFlare was the largest fraud ever prosecuted by the court, with approximately $300 million in victim losses. They argue that a decade-long sentence is warranted to reflect the seriousness of the offense and to serve as a deterrent for future crypto frauds [1].

The defendants, however, have submitted a separate sentencing memo arguing that the requested sentence is excessive. They point to their cooperation with investigators, the time already spent in custody, and the fact that HashFlare customers have withdrawn more than $2.3 billion in value—far exceeding the $487 million they paid for mining contracts. They also claim that every potential victim will be repaid in full, likely from the over $400 million in assets forfeited as part of their plea agreement [1].

Prosecutors dismissed these arguments, noting that the scheme was executed over a four-year period, involved over 440,000 customers, and was designed to create the illusion of returns by funneling funds from new investors to older ones. Much of the proceeds were used to fund the founders’ “lavish lifestyles,” the submission stated [1].

The sentencing hearing is scheduled for August 14, and the outcome is expected to have broader implications for the enforcement of U.S. law in cross-border cryptocurrency fraud cases. The case has already raised legal questions about the jurisdiction of U.S. courts over foreign nationals and the role of extradition in digital asset crimes [1].

The defendants have also continued to seek deportation to their native Estonia, despite a court order mandating they remain in the U.S. for the duration of the legal process. A letter from the Department of Homeland Security suggesting immediate deportation has added uncertainty to the case [1].

The HashFlare case is part of a growing trend of increased regulatory and prosecutorial scrutiny of cryptocurrency-related activities in the U.S. Similar cases, including the recent prosecution of Tornado Cash co-founder Roman Storm, signal that U.S. courts are becoming more active in adjudicating complex crypto-related crimes [3].

Source:

[1] Cointelegraph - [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] advfn.com - [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] advfn.com - [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)