HashFlare Bitcoin Cloud Mining Operators Admit Guilt in Massive $577 Million Crypto Scam
Two Estonian nationals, Sergei Potapenko and Ivan Turõgin, have pleaded guilty to orchestrating a $577 million Ponzi scheme through their cloud mining service, HashFlare. This revelation comes after an extensive investigation led by the FBI's Seattle field office, culminating in the arrest and extradition of the duo to the United States.
HashFlare operated from 2015 to 2019, offering cloud mining services that promised to mine cryptocurrencies like Bitcoin and Ethereum for users without the need for their own mining hardware. Customers would invest in mining contracts, expecting to rent the company's claimed hash power. However, the actual mining capacity was a fraction of what was advertised, with HashFlare only achieving less than 1% of the computing power they claimed. This deception extended to falsified profit reports on their dashboard, misleading users about their investment returns.
The scheme did not stop at mining; it also involved promoting an investment in a fictitious crypto bank called Polybius. This so-called bank never distributed dividends to its investors, leaving thousands worldwide, including many in the U.S., in the lurch. HashFlare's operations ceased in 2018, but by then, the damage was done, with the company having amassed over $577 million in sales.
Legal Consequences and Asset Forfeiture
Following their arrest in Tallinn, Estonia, in November 2022, Potapenko and Turõgin faced serious charges including conspiracy to commit wire fraud, multiple counts of wire fraud, and conspiracy to commit money laundering. They were brought to the U.S., where they have now admitted to one count of conspiracy to commit wire fraud each.
As part of their plea, they agreed to forfeit assets valued at over $400 million. These assets, which include real estate properties and luxury vehicles, will be used to compensate the victims through a forthcoming remission process. The sentencing for both individuals is scheduled for May 8, 2025, with each facing up to 20 years in prison.