Two Estonian nationals, Sergei Potapenko and Ivan Turõgin, were sentenced to 16 months in prison for their roles in a large-scale cryptocurrency Ponzi scheme that defrauded hundreds of thousands of victims worldwide. The sentencing took place in Seattle before U.S. District Judge Robert S. Lasnik. Both men have already served 16 months in custody and are required to pay a $25,000 fine each, as well as complete 360 hours of community service while on supervised release. They are expected to return to Estonia to serve their terms of supervised release.
The court ordered the forfeiture of assets valued at over $450 million, including cryptocurrency, funds, vehicles, real property, and mining equipment seized by U.S. authorities and foreign law enforcement partners. These assets will be made available through a remission process intended to compensate victims; further details about this process will be announced later.
According to court documents, Potapenko and Turõgin operated HashFlare from 2015 to 2019—a company that sold contracts promising customers a share of profits from cryptocurrency mining. However, the company used fake online dashboards to falsely report mining activity and returns and did not possess the computing capacity needed for the claimed operations. Over four years, HashFlare generated more than $577 million in sales. Prosecutors say investor funds were used by the defendants for personal purchases such as real estate, luxury vehicles, investments, and cryptocurrency accounts.
“These defendants were operating a classic Ponzi scheme, involving a glitzy asset: a mirage of cryptocurrency mining,” said Acting U.S. Attorney Teal Luthy Miller. “And 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. 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.”
Prosecutors had sought ten-year prison sentences for both men; the Department of Justice is considering whether it will appeal the sentence.
The investigation received support from multiple agencies including the Cybercrime Bureau of the Estonian Police and Border Guard Service as well as assistance with extradition from Estonia’s Prosecutor General and Ministry of Justice and Digital Affairs. The Criminal Division’s Office of International Affairs also provided significant help during both investigation and extradition processes.
Assistant U.S. Attorneys Andrew Friedman and Sok Tea Jiang for the Western District of Washington prosecuted the case along with Trial Attorneys Adrienne E. Rosen and David Ginensky from the Criminal Division’s Money Laundering and Asset Recovery Section. Assistant U.S. Attorney Jehiel Baer handled asset forfeiture matters.
Individuals who believe they may have been affected by this case can find information at www.fbi.gov/hashflare.
