SEATTLE (CHATNEWSTV) — Two Estonian nationals pleaded guilty Wednesday to operating a massive cryptocurrency Ponzi scheme that defrauded hundreds of thousands of people worldwide, including victims in the United States. The scheme, which ran from 2015 to 2019, amassed over $577 million through fraudulent cryptocurrency mining contracts, federal prosecutors said.
Sergei Potapenko and Ivan Turõgin, both 40, admitted to orchestrating the scam through their company, HashFlare, a purported cryptocurrency mining service. Court documents reveal that while HashFlare claimed to mine Bitcoin and other cryptocurrencies on behalf of customers, it lacked the necessary computing power to conduct most of the operations. Instead, prosecutors said, the company falsified data on its web-based dashboard to give customers the illusion of profitability.
“This was an elaborate deception that manipulated the rapid growth of cryptocurrency markets to defraud investors,” Acting U.S. Attorney Teal Luthy Miller for the Western District of Washington said in a statement. “The defendants used sophisticated methods to present a facade of legitimacy while diverting funds for personal luxury.”
According to authorities, Potapenko and Turõgin used the fraudulent proceeds to purchase real estate, luxury vehicles, and maintain investment and cryptocurrency accounts. Under the terms of their plea agreement, they will forfeit more than $400 million in assets, which will be made available for a victim compensation process. Details on how victims can seek restitution will be announced at a later date, officials said.
Potapenko and Turõgin each pleaded guilty to one count of conspiracy to commit wire fraud and face up to 20 years in prison. Their sentencing is scheduled for May 8. A federal judge will determine the final sentence based on statutory guidelines.
The FBI’s Seattle Field Office led the investigation, with assistance from the Estonian Police and Border Guard’s Cybercrime Bureau. The Justice Department’s Office of International Affairs and Estonian authorities also provided support in extraditing the defendants.
“This case demonstrates our commitment to holding accountable those who exploit emerging financial technologies for fraud,” FBI Special Agent in Charge W. Mike Herrington of the Seattle Field Office said.
The prosecution team includes Trial Attorneys Adrienne E. Rosen and David Ginensky of the Criminal Division’s Money Laundering and Asset Recovery Section, along with Assistant U.S. Attorneys Andrew Friedman and Sok Jiang. Asset forfeiture efforts are being handled by Assistant U.S. Attorney Jehiel Baer.
Individuals who believe they may have been victims of this scheme are encouraged to visit www.fbi.gov/hashflare for more information on potential restitution claims.
