HashFlare Founders Plead for Leniency in $577 Million Fraud Case

Sergey Potapenko and Ivan Turygin, the founders of the cloud mining service HashFlare, have requested the court to consider their already served 16-month sentence. U.S. prosecutors are pushing for a 10-year prison term for orchestrating a $577 million Ponzi scheme, reports Cointelegraph. 

On August 6, investigators submitted a memorandum to the federal court in Seattle. They described the actions of the HashFlare co-founders as a “horrific crime” that resulted in losses of $300 million. In their view, a decade-long sentence would be a just punishment.

However, the attorneys for Potapenko and Turygin argued that the court should mitigate the sentence. They claimed that clients did not actually suffer financial losses: 390,000 investors who invested $487 million eventually withdrew $2.3 billion thanks to the growth of the crypto market. 

They also referenced the 16-month period already served by the HashFlare founders in an Estonian prison following their arrest in 2022. 

The HashFlare Case

Potapenko and Turygin launched HashFlare in 2015. The project offered cloud cryptocurrency mining and promised clients returns from renting computing power for mining Bitcoin and other coins. 

Prosecutors allege it was a “classic Ponzi scheme.” Over four years, the platform attracted $577 million from 440,000 clients, 50,000 of whom were U.S. residents. 

According to the investigation, Potapenko and Turygin did not mine anything—they simply paid old users with the money from new investors. The total losses to victims are estimated at $300 million. Meanwhile, the founders allegedly spent about $400 million on luxury items, including real estate and cars.

In 2018, the HashFlare platform abruptly ceased operations. Its representatives cited unfavorable market conditions and low mining profitability. Clients lost access to funds, which immediately drew the attention of U.S. law enforcement. 

American prosecutors demanded the extradition of Potapenko and Turygin, rejecting the idea of trying the case in Estonia. After pleading guilty, Potapenko and Turygin agreed to transfer assets worth $400 million to compensate victims. In July 2024, a judge released both on bail with the condition that they remain within the boundaries of King County, Washington.

Earlier in April, the founders of HashFlare received notices from the U.S. Department of Homeland Security (DHS) demanding they leave the country contrary to court orders.