The founders of HashFlare, a crypto mining company behind a $577 million Ponzi scheme, have escaped additional jail time after admitting to their roles in the scheme.
Sergei Potapenko and Ivan Turõgin have been in custody for 16 months, and Seattle Federal Court Judge Robert Lasnik gave them time served in their sentencing hearings on Tuesday.
He also ordered each to pay a $25,000 fine and complete 360 hours of community service while on supervised release, which is expected to be served in their native Estonia.
The Department of Justice said on Tuesday that it’s considering whether it should appeal the sentence as prosecutors asked for the duo to be imprisoned for 10 years, while Potapenko and Turõgin had asked for time served.
The pair were arrested in Estonia in November 2022 and spent 16 months in custody before being extradited to the US in May 2024, where they pleaded guilty to conspiracy to commit wire fraud.
Largest fraud case in the court’s history
Seattle prosecutors said it was the largest fraud case they had ever tried, an argument they relied on heavily in pushing for the pair to get 10 years in prison.
Judge Lasnik appeared to find merit in Potapenko and Turõgin’s arguments that the 440,000 customers they were accused of ripping off didn’t suffer significant losses as they forfeited more than $400 million worth of assets as part of their plea deal in February.
The HashFlare founders also noted that 390,000 of those customers who spent $487 million on HashFlare mining contracts have since withdrawn $2.3 billion.
HashFlare a “classic Ponzi,” prosecutors said
Prosecutors had argued that between 2015 and 2019, HashFlare’s sales totaled over $577 million, posting fake dashboards that falsely reported the firm’s mining capacity and the returns investors were making from the scheme. It paid out existing members with funds from newer customers.
Related: Crypto scammer gets 12 years after reneging on restitution deal
“These defendants were operating a classic Ponzi scheme, involving a glitzy asset: a mirage of cryptocurrency mining,” Acting US Attorney Teal Luthy Miller said in the DOJ’s statement.
“Just like a classic Ponzi, they diverted millions of dollars to their own benefit, purchasing their own Bitcoin, real estate, luxury cars, expensive jewelry, and more than a dozen trips on chartered private jets.”
Pair told to “self-deport” before sentencing
Despite a court ordering Potapenko and Turõgin to stay in the US, the pair said in April that they received a letter from the Department of Homeland Security directing them to “deport immediately,” causing considerable confusion over their futures, their lawyers said at the time.
The HashFlare founders have expressed their wishes to return home on multiple occasions.
Magazine: Robinhood’s tokenized stocks have stirred up a legal hornet’s nest
