Two Estonian nationals have admitted to orchestrating a significant cryptocurrency Ponzi scheme, affecting numerous individuals worldwide, including in the United States. The defendants, Sergei Potapenko and Ivan Turõgin, both aged 40, have agreed to surrender assets valued at over $400 million acquired during their fraudulent activities.
Court documents reveal that Potapenko and Turõgin sold contracts through their purported cryptocurrency mining service, HashFlare. Customers were promised shares of cryptocurrency mined by the service. However, between 2015 and 2019, HashFlare generated sales exceeding $577 million without having the necessary computing power to fulfill its mining claims. Instead, customers were presented with falsified data on a web-based dashboard.
The fraud's proceeds funded real estate purchases and luxury vehicles for the defendants while maintaining investment and cryptocurrency accounts. The assets forfeited by Potapenko and Turõgin will be part of a remission process to compensate victims. Further details on this process are forthcoming.
Both defendants pleaded guilty to conspiracy to commit wire fraud and face up to 20 years in prison when sentenced on May 8. A federal judge will determine their sentences based on U.S. Sentencing Guidelines and other legal considerations.
The Justice Department expressed gratitude towards Estonia's Cybercrime Bureau for its investigative support, as well as the Estonian Prosecutor General and Ministry of Justice for assistance with extradition procedures. The department's Office of International Affairs also played a crucial role in this investigation.
Supervisory Official Antoinette T. Bacon from the Justice Department’s Criminal Division made the announcement alongside Acting U.S. Attorney Teal Luthy Miller for the Western District of Washington, FBI Assistant Director Chad Yarbrough from the Criminal Investigative Division, and Special Agent W. Mike Herrington from the FBI Seattle Field Office.
The FBI Seattle Field Office conducted the investigation into this case.
Prosecuting attorneys include Assistant U.S. Attorneys Andrew Friedman and Sok Jiang from Washington's Western District, along with Trial Attorneys Adrienne E. Rosen and David Ginensky from the Money Laundering and Asset Recovery Section of the Criminal Division. Assistant U.S. Attorney Jehiel Baer is managing asset forfeiture aspects related to this case.
Potential victims are encouraged to visit www.fbi.gov/hashflare for more information.