Two Estonian nationals plead guilty to a $577M cryptocurrency Ponzi scheme through HashFlare, defrauding hundreds of thousands globally. They face 20 years in prison and forfeit $400M in assets.
The US Department of Justice (DoJ) has confirmed that two Estonian nationals have admitted guilt in a large-scale cryptocurrency fraud case that impacted numerous victims worldwide. The perpetrators, identified as Sergei Potapenko and Ivan Turõgin, both 40 years old, were originally arrested in November 2022 and extradited to the US in May 2024.
They, reportedly, ran a cryptocurrency fraud scheme that amassed over $577 million between 2015 and 2019. This substantial sum was obtained by misleading investors about the capabilities of their purported cryptocurrency mining service, HashFlare.
According to the DoJ’s press release, Potapenko and Turõgin operated a complex Ponzi scheme (a scam where insanely high returns are offered with minimal effort) involving cryptocurrency mining services. They marketed contracts to investors, promising a portion of the cryptocurrency generated by HashFlare.
Over the four-year period, this operation amassed a substantial sum of money, exceeding half a billion dollars. The scheme victimized hundreds of thousands of individuals across the globe, including those in the United States.
The perpetrators employed sophisticated methods to deceive investors. The fraudulent activity involved a discrepancy between the promised mining capacity and the actual resources available. HashFlare lacked the necessary computing power to conduct extensive mining for clients. Operators, therefore, fabricated data on a web platform to show investors their supposed profits, misappropriating funds for their own benefit.
This means, they not only misrepresented their mining capacity but also created a false impression of profitability through fabricated data. They used the illicitly gained funds to acquire luxury items, including real estate and high-end vehicles and also invested in cryptocurrency and other assets.
While the figure of $577 million represents the total sales generated by the fraudulent scheme, it is important to note that the defendants agreed to forfeit assets worth over $400 million as part of their plea deal. This indicates the scale of the financial gains they acquired through the scheme. These recovered funds will be used to reimburse those who were harmed by the fraudulent scheme, and the process will be revealed by the DoJ at a later date.
Potapenko and Turõgin have pleaded guilty to conspiracy to commit wire fraud, which involves a maximum sentence of 20 years. They will be sentenced on May 8 and their sentencing depends on various factors, including federal guidelines and other relevant legal considerations.
The DoJ commended Estonia’s Cybercrime Bureau, the Estonian Prosecutor General, and the Ministry of Justice and Digital Affairs for their assistance in the investigation and extradition process. The FBI is actively urging victims of the HashFlare fraud to come forward.
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