HashFlare founders Sergei Potapenko and Ivan Turõgin avoided additional prison time after being given credit for time served in the $577M Ponzi scheme case. Seattle Federal Court Judge Robert Lasnik sentenced them to 16 months in prison, but they had already spent that time in custody following their 2022 indictment. However, Judge Lasnik ordered the defendants to pay a $25K fine each and complete 360 hours of community service under supervised release. The sentence also included the forfeiture of over $450M worth of real estate, cars, crypto, and crypto mining gear seized by the U.S. government and its foreign crime-busting partners. Details about the victim compensation remission process will be shared later, but the two will serve their supervised release back in Estonia. Potapenko and Turõgin had previously asked for time served, which was granted, but prosecutors feel a 10-year sentence would do better justice. The Department of Justice said on August 12 that it was also considering filing an appeal. Seattle prosecutors led by Assistant U.S. Attorneys Andrew Friedman and Sok Jiang said this was the largest crypto fraud they had ever tried. They used this argument in court to push for the 10-year jail term they sought. Miller says victims were hurt financially and emotionally Acting U.S. Attorney Teal Miller said “the vast majority” of victims in this case suffered losses that impacted them both financially and emotionally. The Ponzi scheme hurt unsuspecting customers who bought “a mirage of cryptocurrency mining” involving a non-existent “glitzy asset.” Miller felt it was wrong that the two used these millions of dollars to buy their own crypto, hire private jets, buy expensive jewelry, luxury cars, and real estate while their victims suffered. However, Judge Lasnik seemed to agree with Potapenko and Turõgin’s argument that the 440K customers did not suffer significant losses. The two also noted that about 390K of the customers who had bought nearly $487 million worth of HashFlare mining contracts had withdrawn roughly $2.3 billion. Turõgin’s attorney, Andery Spektor, claimed that no customer had suffered any harm, but acknowledged that HashFlare may have lied about the amount of crypto it mined. “These defendants were operating a classic Ponzi scheme … And just like a classic Ponzi, they diverted millions of dollars to their own benefit … Meanwhile, the vast majority of their victims suffered losses — in many cases, losses that had a serious impact on their financial and emotional well-being.” – Teal Miller , Acting U.S. Attorney The initial indictment asserted that the two had swindled HashFlare customers using false information about its mining capacity. The company allegedly mined less than 1% of what it claimed but stole more than $550 million from customers between 2015 and 2019. HashFlare also raised around $25 million from investors in 2017 under the guise of opening the Polybus digital bank. Bini claims ‘zero financial harm’ to anyone Defense counsel and partner at Reed Smith, Mark Bini, claimed that Potapenko and Turõgin were committed to ensuring “zero financial harm” to anyone. According to Bini, HashFlare returned over $350 million in crypto payments to victims between 2022 and 2025. However, prosecutors argued that the harm suffered by HashFlare victims could not be more real. The prosecutors also argued that the defendants had admitted that the data they had provided to discredit their victims’ claims was fabricated. They added that the expert opinion presented as evidence for the defense was substantially based on HashFlare investor earnings, not victim losses. The defendants repeatedly claimed in previous court filings that HashFlare customers did not suffer significant losses since $400 million worth of crypto had already been paid back to them. However, the prosecutors argued that this assumption was wrong. The forfeited assets will be available to compensate the victims at a later date, which has not yet been confirmed. Cryptopolitan Academy: Tired of market swings? Learn how DeFi can help you build steady passive income. Register Now
