HashFlare Founders Sentenced to Time Served for $577M Crypto Ponzi Scheme

The founders of HashFlare, a cryptocurrency mining operation behind a $577 million Ponzi scheme, were sentenced to "time served" following a guilty plea in a U.S. federal court. Sergei Potapenko and Ivan Turõgin, who had been in custody for 16 months, were ordered to pay $25,000 fines and complete 360 hours of community service while under supervised release. The sentence, which aligns with the time they have already served, was announced by Judge Robert Lasnik during a sentencing hearing on Tuesday [1].

The U.S. Department of Justice expressed dissatisfaction with the outcome, stating it was considering an appeal after prosecutors had initially sought a 10-year prison term for each defendant. The case was described by Seattle prosecutors as the largest fraud in the court's history, given the scale of the alleged scheme and the number of affected investors. However, the judge appeared to accept the defense’s argument that 440,000 customers had largely recouped their losses through a February plea deal that saw them forfeit over $400 million in assets [1].

According to the court records, 390,000 customers had invested $487 million in HashFlare mining contracts and eventually withdrew $2.3 billion in returns. This factor, combined with the lengthy pre-trial detention of the defendants, appears to have influenced the decision to grant "time served" rather than imposing a longer prison sentence [1].

Prosecutors described HashFlare as a "classic Ponzi scheme," noting that the company used funds from new investors to pay returns to earlier participants while misleading customers with falsified dashboards. From 2015 to 2019, the scheme reportedly generated over $577 million in sales. Acting U.S. Attorney Teal Luthy Miller stated that the defendants "diverted millions of dollars to their own benefit," using the illicit funds to purchase Bitcoin, luxury real estate, high-end vehicles, and jewelry, as well as funding over a dozen chartered private jet trips [1].

The defendants, who were arrested in Estonia in November 2022 and extradited to the U.S. in May 2024, had previously been instructed by the Department of Homeland Security to "self-deport." Their lawyers expressed confusion over the conflicting directives, though the pair had repeatedly stated their desire to return to their home country [1].

The HashFlare case highlights the growing regulatory scrutiny of the cryptocurrency industry, particularly platforms that promise high returns with minimal transparency. As digital assets continue to evolve as an investment class, the case serves as a reminder of the need for due diligence and the importance of regulatory oversight in preventing fraudulent schemes.

Source: [1] HashFlare Founders Given Time Served For Crypto Ponzi (https://cointelegraph.com/news/hashflare-founders-given-time-served-577m-crypto-ponzi)