According to a report by Decrypt, U.S. federal prosecutors have filed a motion with the Ninth Circuit Court of Appeals seeking to overturn a lenient sentence for the ringleaders of the HashFlare cryptocurrency fraud case. Estonian citizens Sergei Potapenko and Ivan Turõgin are accused of defrauding 440,000 investors worldwide through a $577 million Ponzi scheme, with prosecutors arguing that the original sentence was "exceptionally lenient."
The two defendants have pleaded guilty, admitting to perpetrating the fraud through false mining contracts from 2015 to 2019, misleading investors with fake profit dashboards, and using the proceeds of the fraud to purchase luxury goods and pay returns to early investors. The original judge sentenced them to only three years of supervised release and a $25,000 fine each, while prosecutors had sought a 10-year prison term.
The judge considered factors such as the risk of "indefinite detention" that foreign defendants may face in the U.S. Legal experts analyze that the rationale for the sentence based on "time already served, immigration risks, and compensation considerations" is reasonable. The Ninth Circuit generally respects the discretion of district court judges, making it likely that the original ruling will be upheld.
So far, $400 million has been seized for victim compensation, and the case is referred to as the "largest fraud case" in the history of the Western District of Washington.