Two Estonian entrepreneurs have been sentenced over their roles in what U.S. prosecutors describe as one of the largest cryptocurrency Ponzi schemes in recent years.
Sergei Potapenko and Ivan Turõgin, who ran the now-defunct HashFlare mining platform, will serve 16 months in prison, complete 360 hours of community service, and each pay a $25,000 fine.
The sentence is far lighter than the decade-long prison term requested by prosecutors, leading the Department of Justice to consider challenging the ruling.
The Illusion of a Thriving Mining Business
Operating between 2015 and 2019, HashFlare promised customers returns from a large-scale crypto mining operation.
Investigators say the entire model was a façade – dashboards displaying mining profits were fabricated, and the company did not have the computing capacity to deliver on its claims. In reality, Bitcoin was purchased on exchanges to pay early investors, creating the appearance of genuine returns.
Over four years, HashFlare generated more than $577 million in sales. Authorities allege that a significant portion of investor funds was funneled into personal luxuries, including real estate, luxury vehicles, jewelry, and multiple private jet charters. Acting U.S. Attorney Teal Luthy Miller called it “a textbook Ponzi scheme” that left victims around the globe financially and emotionally devastated.
Seized Assets to Fund Victim Repayments
Law enforcement agencies have confiscated over $450 million in assets linked to the operation, including digital currencies, properties, vehicles, and mining equipment. Plans for distributing these funds to victims will be revealed in the coming months.
Ordered to Leave the U.S.
In a twist, the Department of Homeland Security has reportedly told the pair to leave the United States immediately, contradicting a prior court order allowing them to remain. Both will be deported to Estonia to serve their supervised release.
The FBI has launched a dedicated webpage for individuals who believe they were defrauded by HashFlare to register their claims.
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Alex is an experienced financial journalist and cryptocurrency enthusiast. With over 8 years of experience covering the crypto, blockchain, and fintech industries, he is well-versed in the complex and ever-evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His approach allows him to break down complex ideas into accessible and in-depth content. Follow his publications to stay up to date with the most important trends and topics.
Source: https://coindoo.com/hashflare-co-founders-jailed-in-577m-crypto-fraud-doj-eyes-appeal/