The Attorney’s Office of the Western District of Washington revealed that two Estonian nations had pleaded guilty to a $577M crypto Ponzi scheme. The two had victimized hundreds of thousands of people worldwide, including the United States, through their multi-faceted scheme.
Sergei Potapenko and Ivan Turogin had used the proceeds from their fraud to purchase real estate and luxury vehicles as part of their lifestyle. Court documents showed that the two had agreed to forfeit assets valued at over $400 million obtained from their Ponzi scheme.
Two Estonian nationals plead guilty in crypto Ponzi scheme
🚨🇺🇸🇪🇪ESTONIAN DUO PLEADS GUILTY IN $577M CRYPTO FRAUD
Sergei Potapenko and Ivan Turõgin, just pleaded guilty to running a massive cryptocurrency fraud through their company, HashFlare, scamming hundreds of thousands of people worldwide, including in the U.S.
They promised… pic.twitter.com/2GA6IYy6C1
— Mario Nawfal (@MarioNawfal) February 13, 2025
According to the U.S. Attorney’s Office for the Western District of Washington, Potapenko and Turogin pleaded guilty to defrauding investors through their company HashFlare. The two 40-year-olds sold contracts to customers, entitling them to a share of cryptocurrency mined by their purported cryptocurrency mining service.
“Mr. Potapenko and Mr. Turogin are charged with defrauding investors out of more than half a billion dollars. Ultimately, their elaborate Ponzi scheme fell apart and they conspired to conceal and launder the money which they took from the victims of their scheme.”
~ Richard A. Collodi, Special Agent in Charge of the FBI’s Seattle field office.
Court documents confirmed that HashFlare’s sales totaled more than $577 million between 2015 and 2019. The U.S. Attorney’s office said that the mining company did not possess the necessary computing capacity to perform the majority of the mining that Potapenko and Turogin told HashFlare customers it performed.
The company’s web-based dashboard reflected falsified data instead of showing customers their mining profits as it purported. The duo used the proceeds of the fraud conspiracy to purchase real estate and luxury vehicles and maintained crypto investment accounts.
The court documents revealed that both defendants agreed to forfeit assets worth more than $400 million as of the date of the plea. The U.S. Attorney’s office also disclosed that the forfeited assets will be available for a remission process to compensate victims of the crime.
The two defendants pleaded guilty to one count of conspiracy to commit wire fraud. The court scheduled their sentence for May 8th, and each of them will face a maximum penalty of 20 years for their crime. Court documents also highlighted that a federal district court judge will determine each defendant’s sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
Potapenko and Turogin admit to running another fraudulent operation
The Estonian pair also founded another venture called Polybius in 2017, which was said to be a virtual currency bank. Potapenko and Turogin had promised to pay investors dividends from the company’s profits. The defendants raised roughly $25 million in the scheme and transferred most of the funds to other bank accounts and crypto wallets they controlled. Court documents revealed that Polybius never formed a bank to pay any dividends to investors.
The official documents indicated that the duo was found guilty of conspiring to launder their criminal proceeds through shell companies and phony contracts and invoices. The court alleged that the money laundering conspiracy involved at least 75 real estate properties, six luxury vehicles, crypto wallets, and thousands of cryptocurrency mining machines.
Court papers highlighted that the Justice Department thanked the Cybercrime Bureau of the Estonian Police and Border Guard for its support during the investigation. The Ministry of Justice and Digital Affairs and the Estonian Prosecutor General also offered significant assistance with the extradition of the two Estonian nationals. The legal papers also acknowledged that the Justice Department’s Office of International Affairs also provided extensive assistance to the investigation and the extradition of the defendants.
Court documents showed that Assistant U.S. Attorneys Andrew Friedman and Sok Jiang for the Western District of Washington and Trial Attorney Adrienne E. Rosen and David Ginensky of the Criminal Division’s Money Laundering and Asset Recovery Section were prosecuting the case. The legal papers also indicated that Assistant U.S. Attorney Jehiel Baer, for the Western District of Washington, will be handling asset forfeiture aspects of the case.
The Federal Bureau of Investigation’s Seattle office is also seeking more information from potential victims of Turogin and Potapenko’s two fraudulent schemes through their companies.
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Source: https://www.cryptopolitan.com/estonian-crypto-hashflare-ponzi-scheme/