Guilty Plea Brings Prison Terms to Founders
Co-founders of crypto mining service HashFlare, Sergei Potapenko and Ivan Turogin, have pleaded guilty to conspiracy in the United States to commit wire fraud. The action is part of the plea agreement with prosecutors in the USA, which will see them lose all digital assets held in freeze by the authorities.
On February 12, the US District Court for the Western District of Washington held hearings on a location where Potapenko and Turogin confessed to one of 18 felony charges filed against them. Now these two Estonian nationals face prison sentences up to 20 years. Sentencing is due to take place on May 8.
HashFlare’s Fraudulent Operations
HashFlare was once an eminent service in the crypto mining world, defrauding users from $550 million in 2015-2019. On top of that, in 2017, during its heyday, the company raised $25 million to develop a non-existing digital bank called Polybius.
Initial charge states that HashFlare actually misrepresented its mining capacity, operating at only 1% of efficiency it promised. Although it called time on operations in 2019, legal initiation only came years later. In 2022 Potapenko and Turogin were apprehended in Estonia and extradited to the US in May 2024.
Defense Helps No Customer Losses
After the hearings, Mark Bini, defense counsel and partner at Reed Smith, stated that both defendants will surrender some of their assets and cooperate to certify that there is no financial loss to users. Bini also added that between 2015 and 2022, HashFlare returned a cumulative $350 million of crypto payments.
Meanwhile, Turogin’s lawyer and a partner at Norton Rose Fulbright noted that the defense would prove at sentencing no customer suffered harm, acknowledging that HashFlare did mine cryptocurrency but far below the advertised rate.
HashFlare Case in Line with Crypto Legal Battles
This was heard in the jurisdiction where former Binance CEO Changpeng Zhao had pleaded guilty to one count of felony in 2024. Zhao went to jail for four months and remained active in the crypto industry thereafter.
As May 8 sentencing looms large, another high-profile case of legal tussle in the crypto landscape is emerging which shows the risks in piracy of operations in the digital asset world.
