In a significant legal outcome, Sergei Potapenko and Ivan Turõgin, both 40 years old from Estonia, have pleaded guilty to running a large-scale Ponzi scheme involving crypto assets that defrauded “hundreds of thousands” of victims globally.
The US Department of Justice (DOJ) announced that the defendants have agreed to forfeit over $400 million in assets obtained through their fraudulent activities.
Massive Fraud Behind HashFlare’s Illusory Crypto Profits
The DOJ alleges that operating under the company name “HashFlare,” Potapenko and Turõgin sold contracts that promised customers a share of crypto allegedly mined by the business.
However, court documents revealed that HashFlare did not possess the necessary computing power to conduct the mining it claimed, misleading customers who believed they were making legitimate investments.
Between 2015 and 2019, HashFlare generated sales exceeding $577 million. Despite these figures, the company lacked the computing capability it advertised to its customers. A web-based dashboard intended to display mining profits instead presented falsified data, creating the illusion of profitable investments.
The defendants allegedly used the proceeds from their fraudulent scheme to purchase luxury real estate, high-end vehicles, and maintain crypto investment accounts.
DOJ Unveils Compensation Plan For Victims
As part of their guilty pleas, the Department of Justice revealed that Potapenko and Turõgin accepted responsibility for their actions and agreed to forfeit assets valued at more than $400 million.
These funds are earmarked for a remission process aimed at compensating the victims of their fraudulent operations. Specific details regarding this compensation process will be disclosed by authorities in the future.
This case is part of a broader crackdown on financial crimes involving crypto assets. Recently, US law enforcement, in collaboration with international partners, charged two individuals linked to a multi-billion-dollar money laundering operation.
These individuals, of Russian nationality, allegedly facilitated transactions related to stolen credit card data and ransomware profits.
Authorities successfully disrupted three cryptocurrency exchanges primarily used by criminals, including ransomware groups and darknet drug traffickers.
Both Potapenko and Turõgin pleaded guilty to one count of conspiracy to commit wire fraud, a charge that carries a potential maximum prison sentence of 20 years.
Their sentencing is scheduled for May 8, during which a federal judge will determine penalties in accordance with US Sentencing Guidelines and various mitigating factors.
The DOJ expressed gratitude for the substantial assistance provided by the Cybercrime Bureau of the Estonian Police and Border Guard, as well as the Estonian Prosecutor General and the Ministry of Justice and Digital Affairs, which facilitated the extradition of the defendants.
Featured image from DALL-E, chart from TradingView.com
