Two Estonian nationals, Sergei Potapenko and Ivan Turõgin, have pleaded guilty to operating a crypto Ponzi scheme through their cloud mining service, HashFlare.
Two Estonian nationals, Sergei Potapenko and Ivan Turõgin, have pleaded guilty to operating a crypto Ponzi scheme through their cloud mining service, HashFlare. The U.S. Department of Justice (DOJ) announced that the scheme, which ran from 2015 to 2019, defrauded investors of approximately $577 million.
HashFlare allowed users to purchase mining contracts to rent computing power for mining cryptocurrencies like Bitcoin and Ether.
However, the DOJ revealed that the company did not possess the actual hashrate capacity to perform the mining it claimed, with actual mining power reportedly less than 1% of what was advertised. Users were misled by falsified profits shown on a web-based dashboard.
In addition to the fraudulent mining operations, Potapenko and Turõgin promoted a non-existent cryptocurrency bank called Polybius, which failed to deliver promised dividends to investors. The fraudulent activities resulted in hundreds of thousands of victims worldwide, including many in the United States.
The defendants were arrested in Tallinn, Estonia, in November 2022, and subsequently extradited to the U.S. where they faced multiple charges, including conspiracy to commit wire fraud and money laundering.
As part of their plea agreement, both men agreed to forfeit assets valued at over $400 million, which will be used to compensate victims in a forthcoming remission process.
The DOJ has stated that Potapenko and Turõgin face a maximum of 20 years in prison when they are sentenced on May 8. The investigation was led by the FBI’s Seattle field office, with assistance from various U.S. officials and the Estonian authorities, including the Ministry of Justice and Digital Affairs.
This article contains links to third-party websites or other content for information purposes only (“Third-Party Sites”). The Third-Party Sites are not under the control of CoinMarketCap, and CoinMarketCap is not responsible for the content of any Third-Party Site, including without limitation any link contained in a Third-Party Site, or any changes or updates to a Third-Party Site. CoinMarketCap is providing these links to you only as a convenience, and the inclusion of any link does not imply endorsement, approval or recommendation by CoinMarketCap of the site or any association with its operators.
This article is intended to be used and must be used for informational purposes only. It is important to do your own research and analysis before making any material decisions related to any of the products or services described. This article is not intended as, and shall not be construed as, financial advice.
The views and opinions expressed in this article are the author’s [company’s] own and do not necessarily reflect those of CoinMarketCap.
