Massive Crypto Fraud Uncovered
Two Estonian nationals, Sergei Potapenko and Ivan Turõgin, have pleaded guilty to running a $577 million crypto Ponzi scheme through their company HashFlare, according to the U.S. Attorney’s Office for the Western District of Washington.
The pair, both 40 years old, face up to 20 years in prison for conspiracy to commit wire fraud, with sentencing scheduled for May 8. As part of their plea deal, they have agreed to forfeit $400 million in assets, including:
- Real estate holdings
- Luxury vehicles
- Cryptocurrency wallets
False Promises and Fabricated Results
Between 2015 and 2019, HashFlare sold fraudulent crypto mining contracts, claiming to mine digital currencies for investors. However, the company:
- Lacked the computing power to conduct actual mining.
- Falsified performance data to mislead investors.
Despite collecting over $577 million from victims, HashFlare performed little to no real mining, according to U.S. prosecutors.
Additional Fraud via Polybius ICO
Potapenko and Turõgin also admitted to a second scheme: the Polybius ICO, a 2017 digital bank offering that raised approximately $31 million.
- Investors were promised dividends from a blockchain-based digital bank, but no bank was ever created.
- The funds were never invested into the project.
- The defendants spent the proceeds on personal luxuries, according to the FBI Seattle office.
Laundering the Fraud Proceeds
The pair laundered stolen funds through:
- 75 properties
- Six luxury vehicles
- Thousands of crypto mining machines
- Multiple crypto wallets
International Investigation and Extradition
The scheme’s unraveling was part of an international operation:
- FBI’s Seattle Field Office worked with global partners.
- Both men were arrested in Tallinn, Estonia, on November 20, 2022, and later extradited to the U.S. to face charges.
The FBI has urged potential victims of the HashFlare scam to come forward and share information via a dedicated website.
U.S. Authorities Continue Crypto Crackdown
The case is part of a broader U.S. crackdown on crypto fraud, following recent high-profile enforcement actions, including:
- A $1.51 billion fine secured by the U.S. Attorney’s Office for the Western District of Washington in 2024.
- A $4.3 billion settlement with Binance, marking a record penalty against a crypto exchange.
