Estonians Plead Guilty in $577M Crypto Mining Scam: HashFlare Investors Duped

Estonian Duo Confess to Running Massive Cryptocurrency Scam

Two Estonian nationals have confessed to their involvement in a large-scale cryptocurrency Ponzi scheme that deceived hundreds of thousands of investors worldwide, including several within the United States. The fraudulent operation revolved around a deceptive crypto-mining service called HashFlare, which resulted in investor losses exceeding $577 million.

Asset Seizure and Deceptive Practices

According to court documents, Sergei Potapenko and Ivan Turõgin, both 40 years old, sold contracts to clients that supposedly entitled them to a portion of the digital currency mined by their service. However, HashFlare lacked the computing power necessary to produce the advertised returns. The company’s online dashboard was manipulated to display false data, leading investors to believe that profitable mining was actually occurring.

The accused enticed individuals to invest their savings by promising substantial returns. To maintain the scheme’s facade of legitimacy, they even distributed limited profits to early investors. However, instead of compensating customers as promised, the money was diverted into various accounts and cryptocurrency wallets under their control. These funds were then used to purchase real estate and luxury vehicles, as well as to fund several investment and crypto accounts.

As part of their plea agreement, the pair will forfeit assets worth over $400 million. These funds are intended to be used to compensate the victims, although further details regarding the restitution process will be provided at a later date.

Legal Action and Sentencing Details

Following a thorough investigation into their fraudulent crypto-mining activities, authorities apprehended Potapenko and Turõgin in Estonia in November 2022. The U.S. Department of Justice subsequently charged them with 16 counts of wire fraud and one count of conspiracy to commit money laundering. Despite initial challenges with extradition—after an Estonian Circuit Court initially rejected the U.S. request due to concerns about detention conditions—their extradition to the United States was approved in January 2024.

After being formally extradited, both individuals pleaded guilty to one count of conspiracy to commit wire fraud. Sentencing is scheduled for May 8, and each faces a potential prison sentence of up to 20 years. A federal judge will ultimately determine the final sentences based on the U.S. Sentencing Guidelines and other relevant legal factors.