Two Estonian nationals, Sergei Potapenko and Ivan Turõgin, were sentenced in Seattle to 16 months in prison for running a large-scale cryptocurrency Ponzi scheme that defrauded hundreds of thousands of victims worldwide. The sentencing was handed down by 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 and complete 360 hours of community service while on supervised release. They are expected to return to Estonia for their supervised release period.
The court also ordered the forfeiture of assets valued at over $450 million, including cryptocurrency, funds, vehicles, real estate, and cryptocurrency mining equipment. These assets were seized by the United States with assistance from foreign law enforcement agencies. A remission process will be established to compensate victims using these assets, with further details to be announced later.
Court documents revealed that Potapenko and Turõgin operated HashFlare, which claimed to offer customers a share in profits from cryptocurrency mining operations. In reality, between 2015 and 2019, HashFlare generated more than $577 million through sales but lacked the computing power necessary for legitimate mining activities. Instead, the company used fake online dashboards to mislead investors about returns and activity levels. The defendants diverted investor funds for personal purchases such as real estate, luxury cars, jewelry, bitcoin acquisitions, and private jet travel.
“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 a ten-year prison sentence for both men. The Department of Justice is currently considering whether to appeal the sentences.
The investigation involved cooperation with several international agencies. The Cybercrime Bureau of the Estonian Police and Border Guard provided support during the investigation phase. Assistance with extradition came from the Estonian Prosecutor General’s Office as well as the Ministry of Justice and Digital Affairs. The Criminal Division’s Office of International Affairs was also involved in both investigation and extradition efforts.
Assistant U.S. Attorneys Andrew Friedman and Sok Tea Jiang prosecuted the case for the Western District of Washington alongside 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 managed asset forfeiture matters related to this case.
Potential victims are encouraged to visit www.fbi.gov/hashflare for information about next steps regarding compensation.
