Hashflare Co-Founders Plead Guilty in $577M Crypto Fraud Scheme

Hashflare co-founders Sergei Potapenko and Ivan Turõgin pleaded guilty to conspiracy to commit wire fraud for operating a $577 million crypto mining Ponzi scheme. Arrested in Estonia in November 2022 and extradited to the U.S., they face up to 20 years in prison.

Between 2015 and 2019, Potapenko and Turõgin misled investors, offering returns from Hashflare's crypto mining operations. However, court records reveal Hashflare had less than 1% of the claimed computing power, using purchased crypto for payouts rather than mined coins. When investors sought withdrawals, the pair stalled payments or used crypto bought from exchanges.

Despite their plea, defense attorney Andrey Spektor of Norton Rose Fulbright US LLP argued no financial harm occurred, stating Hashflare provided real services and repaid investors, albeit with purchased crypto.

Court documents show Potapenko and Turõgin spent investors' funds on luxury cars and real estate. They agreed to forfeit over $400 million in assets to compensate victims.

The sentencing is scheduled for May 8 in Seattle federal court.