Key Points:
- HashFlare crypto fraud led to a $577 million Ponzi scheme, deceiving global investors.
- Founders Sergei Potapenko and Ivan Turõgin now face up to 20 years in prison.
HashFlare crypto fraud saw its founders falsify mining profits and launder funds. U.S. authorities seized over $400M in assets for victim compensation.
HashFlare Crypto Fraud: $577M Ponzi Scheme Uncovered
Following an extensive FBI investigation reported by the U.S. Department of Justice (DOJ), Estonian nationals Sergei Potapenko and Ivan Turõgin, operators of the defunct cloud mining service HashFlare, have pleaded guilty to a multi-faceted $577 million cryptocurrency Ponzi scheme.
HashFlare, which operated between 2015 and 2019, offered cloud mining services, allowing users to mine cryptocurrencies like Bitcoin and Ethereum without the need for expensive hardware. Instead, users could purchase contracts to rent hashrate from HashFlare’s mining infrastructure.
However, the DOJ revealed that HashFlare did not possess the computing power it advertised, operating a fraudulent scheme that generated over $577 million in revenue from unsuspecting investors.
Read more: Estonian Government Greenlights HashFlare Founder’s US Extradition Drama!
Sentencing & Asset Seizures in HashFlare Crypto Fraud Case
The DOJ’s HashFlare investigation revealed that the platform mined Bitcoin at less than 1% of the advertised hash rate, misleading investors about potential profits. Furthermore, HashFlare promoted a fake crypto bank called Polybius, which failed to deliver on promised dividends, exacerbating the financial losses for investors.
After being arrested in Estonia in 2022 and extradited to the U.S., Potapenko and Turõgin pleaded guilty to wire fraud and money laundering. Investigations found they had laundered stolen funds through crypto accounts, and purchased 75 real estate properties, six luxury cars, and mining hardware.
Following their guilty plea, the pair agreed to forfeit assets exceeding $400 million, which will be used to compensate victims through a remission process.
Sentencing for Potapenko and Turõgin is scheduled for May 8th, where they face up to 20 years in prison. The FBI’s Seattle field office led the HashFlare investigation, with support from Estonian authorities and various U.S. officials and prosecutors.
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