HashFlare Operators Plead Guilty in $577M Cryptocurrency Mining Fraud

TLDR

• Estonian nationals Sergei Potapenko and Ivan Turõgin pleaded guilty to running a $577 million crypto Ponzi scheme through HashFlare
• HashFlare operated from 2015-2019, claiming to offer cloud mining services but only had 1% of claimed computing power
• The pair also ran a fake crypto bank called Polybius that defrauded customers
• They purchased luxury items and real estate with the fraudulent proceeds
• They face up to 20 years in prison and agreed to forfeit $400 million in assets

Two Estonian nationals have pleaded guilty to orchestrating a $577 million cryptocurrency fraud through their cloud mining service HashFlare, bringing an end to one of the largest crypto mining schemes uncovered to date.

Sergei Potapenko and Ivan Turõgin, the founders of HashFlare, admitted to running a complex Ponzi scheme that attracted hundreds of thousands of victims worldwide between 2015 and 2019. The U.S. Department of Justice announced the guilty pleas on February 14, 2025.

HashFlare marketed itself as a cloud mining service that allowed users to mine cryptocurrencies like Bitcoin and Ethereum without purchasing expensive mining hardware. Customers could buy mining contracts to rent computing power from HashFlare’s supposed mining infrastructure.

The reality was far different from what HashFlare advertised. According to the DOJ, the company possessed less than 1% of the computing power it claimed to have. The web-based dashboard shown to customers displayed fake mining profits, creating an illusion of legitimate operations.

The scheme extended beyond false mining claims. Potapenko and Turõgin also created a fraudulent cryptocurrency bank called Polybius. They promised investors dividends from the bank’s operations, but these payments never materialized.

The investigation revealed that the pair used the fraudulent proceeds to fund a lavish lifestyle. They purchased 75 real estate properties and six luxury vehicles. They also maintained various investment and cryptocurrency accounts with the stolen funds.

HashFlare’s operations began to unravel in 2018 when the company suspended its mining services. The platform eventually shut down completely, but not before collecting over $577 million from unsuspecting customers.

The Fall of HashFlare

Law enforcement caught up with Potapenko and Turõgin in November 2022. They were arrested in Tallinn, Estonia, and later extradited to the United States to face charges. The initial indictment included conspiracy to commit wire fraud, 16 counts of wire fraud, and one count of conspiracy to commit money laundering.

As part of their plea agreement, both men pleaded guilty to one count of conspiracy to commit wire fraud. They also agreed to forfeit assets currently valued at more than $400 million, which will be used to compensate victims through a remission process.

The investigation involved extensive international cooperation. The DOJ acknowledged support from Estonian authorities, including the Police, Prosecutor General, and Ministry of Justice and Digital Affairs. The FBI’s Seattle field office led the investigation with assistance from various U.S. officials and prosecutors.

The fraudulent scheme impacted victims across multiple countries, with many customers in the United States. The case highlights how cloud mining services, which promise easy access to cryptocurrency mining, can be used to disguise fraudulent operations.

Both defendants are scheduled for sentencing on May 8, 2025. They each face a maximum sentence of 20 years in prison for their roles in the scheme.

The $400 million in forfeited assets represents one of the largest recoveries in a cryptocurrency fraud case. The DOJ will establish a process to return these funds to victims, though details of this remission process have not yet been announced.

The HashFlare case took several years to reach this conclusion, from the company’s closure in 2019 to the arrests in 2022 and finally the guilty pleas in 2025. The investigation involved tracking complex financial transactions across multiple jurisdictions.

The DOJ’s investigation uncovered that HashFlare’s operations were fraudulent from the beginning. The company never had the mining capacity to fulfill the contracts it sold to customers, making it impossible to generate the returns promised to investors.