HashFlare Founders Plead for Leniency Amid $577M Crypto Fraud Case in U.S. Court

The co-founders of the collapsed crypto-mining platform HashFlare, Sergei Potapenko and Ivan Turõgin, are urging a U.S. federal judge to impose a lighter sentence after pleading guilty to wire fraud linked to a massive $577 million Ponzi scheme. The case, described by prosecutors as one of the largest frauds ever presented in Seattle federal court, has seen the Department of Justice call for a 10-year prison term for both defendants.

In a sentencing memo filed ahead of their August 14 court hearing, prosecutors emphasized the significant harm caused—citing nearly $300 million in losses for thousands of victims. They allege that between 2015 and 2019, the defendants sold fraudulent crypto-mining contracts to more than 440,000 customers, using a classic Ponzi scheme structure where newer customer funds were used to pay older ones, while the founders lived lavishly.

Potapenko and Turõgin were arrested in Estonia in November 2022 and extradited to the U.S. in May 2024 after spending 16 months in Estonian custody. Since arriving in the U.S., they have pleaded guilty to conspiracy to commit wire fraud and are currently released on bail.

In their defense, the founders argue that many HashFlare customers actually withdrew more funds than they invested, due to the sharp appreciation in cryptocurrency prices. Their legal team claims that 390,000 customers who invested $487 million had collectively withdrawn over $2.3 billion, and that the real economic harm may be overstated. Additionally, they noted that more than $400 million in assets have been forfeited and will be used to compensate victims.