Sergei Potapenko and Ivan Turõgin, the co-founders of the now-defunct crypto mining platform HashFlare, are asking a U.S. judge for no additional jail time after pleading guilty to conspiracy to commit wire fraud. But federal prosecutors argue the pair should serve 10 years in prison, calling the operation a “classic Ponzi scheme” and the largest crypto fraud case in the court’s history.
The two men were arrested in Estonia in November 2022, spending 16 months in Estonian custody before their May 2024 extradition to the U.S.. They are currently out on bail pending sentencing, which is scheduled for August 14 in Seattle federal court.
Prosecutors: $300M in Losses, Fake Returns, Lavish Lifestyles
In a sentencing memo submitted Wednesday, prosecutors said the HashFlare operation caused approximately $300 million in victim losses and involved the sale of $577 million worth of fake crypto mining contracts to around 440,000 customers between 2015 and 2019.
They alleged the defendants falsely represented mining capacity, fabricated returns, and paid old clients with funds from new ones, a hallmark of Ponzi schemes. The government also highlighted the duo’s lavish spending, claiming the fraud was used to fund luxury lifestyles at the expense of unsuspecting investors.
“This was a horrible crime of historic proportions,” the prosecutors wrote, urging 10-year prison terms for both men.
Defense: No Harm, Full Restitution Promised
In their own memo filed the same day, Potapenko and Turõgin’s attorneys argued that the sentence would be excessive, citing their cooperation with authorities and time served abroad. They emphasized that many HashFlare users ended up making profits due to the crypto market’s rise since the scheme ended.
Their lawyers claimed that 390,000 customers withdrew $2.3 billion, despite collectively investing $487 million—suggesting the financial harm is overstated.
The defense added that victims will be fully reimbursed, largely from over $400 million in assets forfeited during a February 2024 plea deal.
As the court weighs restitution promises against the fraud’s magnitude, the August 14 sentencing could set a precedent in crypto-related criminal justice.
Disclaimer
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