HashFlare co-founders plead guilty to wire fraud conspiracy

Sergei Potapenko and Ivan Turõgin have pleaded guilty to a wire fraud conspiracy. They avoided nearly 20 other charges in the process.

Their case took an unexpected turn when prosecutors overestimated claims and lost credibility with a key witness. The two men have agreed to forfeit assets and help reimburse victims, but their sentencing is still uncertain.

HashFlare was once a well-regarded cloud mining company. However, it fell apart in 2022 when Potapenko and Turõgin were arrested for defrauding investors of $575 million. After a lengthy legal battle, they admitted guilt.

Their defense lawyer stated that while HashFlare did mine crypto, it did not produce as much as promised. Instead of real mining profits, they sometimes paid users with crypto purchased from the market. The lawyer emphasized that no customer suffered actual harm. Although they accepted guilt, they tried to minimize the damage.

HashFlare attracted users by promising to allow them to mine crypto from home. However, the company lacked the resources to fulfill these promises. Instead, it used customer funds to buy assets, falsely claiming these were mining earnings. The FBI reported that this fraudulent scheme lasted from 2015 to 2018. HashFlare eventually invoked a clause to shut down after 28 days of unprofitability.

Most of the user funds were used for the founders’ personal gain. In their guilty plea, they expressed regret and a willingness to repay victims. They agreed to surrender frozen assets, including luxury cars and real estate, and to provide customer data for reimbursement.

Despite their guilty plea, it may not significantly lessen their sentence. The prosecution made serious errors, including overstating damages by $225 million. This led to rushed negotiations. Ultimately, the two executives pleaded guilty to one charge, with nearly 20 others dropped. Their final sentence remains unknown, but the outcome could have been much worse for them.

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