HashFlare Operators Plead Guilty in $577 Million Crypto Fraud Scheme

Sergei Potapenko and Ivan Turõgin, the co-founders of the crypto mining ponzi scheme HashFlare, have pleaded guilty to defrauding hundreds of thousands of victims within and outside the United States of more than $577 million through their purported mining service.

According to an official release from the United States Department of Justice (DOJ), Potapenko and Turõgin have each pleaded guilty to one count of conspiracy to commit wire fraud and face maximum penalties of 20 years behind bars. Their sentencing has been scheduled for May 8, to be determined by a federal district court judge.

The HashFlare Mining Ponzi Scheme

Potapenko and Turõgin are both 40 and Estonian nationals. While operating HashFlare, they sold contracts that entitled users to a share of cryptocurrencies mined by the purported mining service. This meant that users a percentage of the company’s purported mining operations in exchange for some of the crypto assets produced.

Between 2015 and 2019, the duo sold contracts worth over $577 million. Despite claiming that HashFlare ran a mining service, the company did not have the computing capacity needed to perform the activities. In fact, HashFlare only possessed less than 1% of the computing power its founders claimed to have.

To cover up the scheme, Potapenko and Turõgin tweaked HashFlare’s web-based dashboard, which showed customers their mining profits, to reflect false data. While customers were misled to believe their money worked for them, HashFlare’s co-founders used the funds to acquire luxury vehicles, real estate, cryptocurrencies, and other forms of investment.

HashFlare Founders Forfeit $400M

On a few occasions when investors tried to claim their proceeds from the mining operations, Potapenko and Turõgin either excused their inability to make the payments or settled the users with cryptocurrencies bought in the open market.

Following their arrest in Estonia in November 2022 on an 18-count indictment and subsequent extradition to the United States in May 2024, Potapenko and Turõgin have remained in the custody of American authorities. Their guilty pleas represent the last stages in the two-year-long legal battle.

While the duo await their sentencing, they have agreed to forfeit assets worth more than $400 million gotten through the Ponzi scheme. The DOJ intends to liquidate the assets and use the funds to reimburse HashFlare victims in the coming months. The agency will announce details about the compensation at a later date.