The U.S. Attorney’s Office for the Western District of Washington secured $400 million in asset forfeiture as part of a guilty plea from two Estonian nationals who operated a $577 million crypto Ponzi scheme.
Sergei Potapenko and Ivan Turõgin, both 40, pleaded guilty to conspiracy to commit wire fraud after selling fraudulent crypto mining contracts through their company HashFlare.
However, the defendants lacked the necessary computing power to conduct the crypto mining they promised, instead using falsified data on their platform to create the illusion of success.
As part of their agreement, the defendants agreed to forfeit assets, including real estate, luxury vehicles, and crypto accounts, according to a statement on Thursday.
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"Between 2015 and 2019, HashFlare’s sales totaled more than $577 million, but HashFlare did not possess the requisite computing capacity to perform the vast majority of the mining," said the U.S. Attorney’s Office.
Potapenko and Turõgin now face up to 20 years in prison for conspiracy to commit wire fraud, with their sentencing scheduled for May 8.
The two of them also admitted to running another fraudulent operation, Polybius, an Initial Coin Offering (ICO) for a digital bank project that raised approximately $31 million in 2017.
The funds raised through Polybius were never invested in the bank, and no dividends were ever paid to investors, further adding to the fraudulent nature of their schemes, the statement reads.
"Instead of using the proceeds to create a digital bank, Turõgin and Potapenko used a large portion of the proceeds for their own personal benefit," the FBI Seattle office said.
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The U.S. Attorney’s Office alleges the defendants laundered the fraud proceeds through at least 75 properties, six luxury vehicles, crypto wallets, and thousands of crypto mining machines.
The FBI’s Seattle Field Office played a key role in the investigation, working with international law enforcement agencies to ensure the defendants were apprehended and extradited from Estonia.
Both culprits were arrested on November 20, 2022, in Tallinn, Estonia, and were later extradited to the U.S. to face charges.
The FBI also calls for additional individuals who believe they were victims of the Hashflare fraudulent scheme to come forward. It has set up a dedicated website where potential victims can submit information.
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The guilty plea and the forfeiture are part of a broad effort by U.S. authorities to hold crypto operators accountable for fraudulent activities.
The crackdown follows significant actions taken earlier in 2024 when the U.S. Attorney’s Office for the Western District of Washington secured a record-breaking $1.51 billion in fines.
The majority came from the global crypto exchange Binance, which was penalized in a $4.3 billion settlement for violating U.S. regulations.
Edited by Sebastian Sinclair
