Estonian Creators of HashFlare Bitcoin Mining Fraud Receive 16-Month Prison Sentences
The operators of the HashFlare cryptocurrency Ponzi scheme, Sergei Potapenko and Ivan Turoğin, have been sentenced to 16 months in prison for defrauding over 440,000 investors worldwide out of $577 million between 2015 and 2019.
The scheme, which promised returns from cryptocurrency mining, was in fact fabricating mining activity and using fake dashboards. Potapenko and Turoğin used the funds to purchase luxury items such as real estate, luxury cars, jewelry, and more than a dozen trips on chartered private jets.
As part of their guilty plea, the pair forfeited $500 million to a remission fund intended for victim compensation. They also provided the U.S. government with a customer database to help identify victims and facilitate claims processing.
Despite the large total withdrawals by a majority of customers, many victims suffered significant financial and emotional losses. The exact claims process for victims has not been detailed publicly, but victims are encouraged to monitor announcements from the U.S. Department of Justice or designated claims administrators for official instructions on how to file claims for compensation from the remuneration fund.
The FBI has set up a dedicated page on its website for anyone who believes they may be a victim of HashFlare.
Prosecutors had sought a 10-year prison term for Potapenko and Turoğin, but they were sentenced to 16 months in prison, followed by supervision and community service, and fined $25,000 each. The Department of Justice is considering an appeal of the ruling.
Acting U.S. Attorney Teal Luthy Miller described the scheme as a "classic Ponzi scheme" that caused serious financial and emotional harm to victims. Potapenko and Turoğin will be deported to Estonia to serve their terms of supervised release.
In summary, the HashFlare Ponzi scheme involved the fraudulent raising of over $577 million, with $500 million forfeited for victim compensation. The exact claims process for victims is expected to be available through official channels managing restitution. Hundreds of thousands of people around the world fell victim to the scheme, with seized assets including digital assets, real estate, vehicles, and mining equipment.
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