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Co-Founders of Hashflare Plea Guilty to Conspiracy to Commit Wire Fraud
The co-founders of Hashflare, a crypto mining scheme that defrauded hundreds of thousands of investors worldwide, have pleaded guilty to conspiracy to commit wire fraud.
Sergei Potapenko and Ivan Turõgin, both 40 years old, were arrested in November 2022 in their native Estonia and extradited to the United States on an 18-count indictment. Yesterday, both men pleaded guilty to one count each of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison.
The Scheme
Between 2015 and 2019, Potapenko and Turõgin convinced Hashflare’s investors to rent a percentage of the scheme’s crypto mining operations in exchange for a percentage of the cryptocurrency Hashflare produced. However, according to court documents, Hashflare had only a tiny fraction of the mining equipment it purported to have – less than 1% of the computing power Potapeno and Turõgin had sold.
When investors tried to claim their proceeds, prosecutors say the two men either resisted making payments by making excuses or paid them back with crypto purchased on the open market.
The Aftermath
Potapenko and Turõgin’s lawyers argue that none of Hashflare’s investors suffered financial harm, claiming that the men’s only crime was lying about the size of Hashflare’s mining operation.
“Ivan and Sergei ran successful businesses, providing real services, employing almost 100 Estonians, and doing charitable work in Estonia. As Ivan admitted [Wednesday], one of his and Sergei’s businesses promised to mine crypto and did in fact mine crypto, but not as much as it had promised; instead, it sometimes repaid customers with crypto it had purchased on the open market,” said Andrey Spektor, partner at Norton Rose Fulbright US LLP and counsel to Turõgin.
“Importantly, however, as we will show at sentencing, no customer has suffered any harm. Ivan and Sergei look forward to returning to Estonia and resuming their lives.”
The Sentence
As part of the plea agreement, Potapenko and Turõgin agreed to forfeit assets valued over $400 million, which will be used to pay back investors.
Potapenko and Turõgin will be sentenced in a Seattle court on May 8.
Conclusion
The guilty pleas of the co-founders of Hashflare mark a significant moment in the fight against crypto-related fraud. The scheme’s scale and scope are staggering, with thousands of investors worldwide affected. While the men’s lawyers argue that no investors suffered financial harm, the fact remains that the scheme was built on a foundation of deception and fraud. The outcome of their sentencing will be closely watched, as it will serve as a warning to others considering similar schemes.
FAQs
- What is Hashflare?
- Hashflare is a crypto mining scheme that was launched in 2015 and defrauded hundreds of thousands of investors worldwide.
- Who are Sergei Potapenko and Ivan Turõgin?
- They are the co-founders of Hashflare, who have pleaded guilty to conspiracy to commit wire fraud.
- What was the scheme?
- The scheme involved convincing investors to rent a percentage of the scheme’s crypto mining operations in exchange for a percentage of the cryptocurrency produced. However, the scheme had only a tiny fraction of the mining equipment it purported to have.
- What are the consequences of the guilty pleas?
- Potapenko and Turõgin will face a maximum sentence of 20 years in prison, and they have agreed to forfeit assets valued over $400 million, which will be used to pay back investors.
- When will the sentencing take place?
- Potapenko and Turõgin will be sentenced in a Seattle court on May 8.
