Sergey Potapенко and Ivan Turokin have pleaded guilty to telecommunications fraud. They also avoided nearly 20 other charges.
Their case took an unexpected turn when the prosecutor overestimated the claims and lost trust from key witnesses. The two have agreed to forfeit assets and assist in compensating the victims, but their sentences remain uncertain.
HashFlare was once a reputable cloud mining company. However, in 2022, Potapенко and Turokin were arrested for defrauding investors of $575 million, leading to the company's bankruptcy. After a lengthy legal battle, they finally pleaded guilty.
Their defense attorney stated that although HashFlare did mine cryptocurrency, the output did not meet the promised levels. They sometimes paid users with cryptocurrency purchased from the market rather than real mining profits. The lawyer emphasized that no customers were actually harmed. While they admitted guilt, they tried to minimize the damages.
HashFlare promised to allow users to mine from home to attract users. However, the company lacked the resources to fulfill these promises. Instead, it used customer funds to purchase assets, falsely claiming these were mining revenues. The FBI reported that this fraud lasted from 2015 to 2018. HashFlare eventually invoked terms and shut down after 28 days of no profit.
Most of the user funds were embezzled by the founders, who expressed remorse in their plea and indicated a willingness to repay the victims. They agreed to hand over frozen assets, including luxury cars and real estate, and provide customer data for compensation.
Despite their guilty pleas, the sentences may not be significantly reduced. The prosecution made serious errors, including exaggerating the losses to $225 million. This led to rushed negotiations. Ultimately, the two executives pleaded guilty to one charge, while nearly 20 other charges were dropped. Their final sentencing is still unclear, but the outcome could be much worse for them.
