Court imposes probation on Estonian cryptocurrency entrepreneurs in American jurisdiction
In a landmark case, Estonian crypto entrepreneurs Sergei Potapenko and Ivan Turõgin have been convicted for operating the HashFlare Ponzi scheme, which defrauded investors of over $577 million between 2015 and 2019.
The scheme, which promised mining profits, largely fabricated mining activity, using new investor funds to pay old investors. This classic Ponzi scheme deceived about 440,000 clients globally, including 50,000 U.S. residents.
HashFlare, a company owned by Turogin and Potapenko, sold contracts that gave clients the right to receive a share of cryptocurrency allegedly mined through their cryptocurrency mining service. However, the company did not have sufficient computing power to carry out most of the claimed cryptocurrency mining.
The US justice system plans to use the $400 million confiscated from Potapenko and Turogin to compensate victims for the damage caused by the crime. HashFlare reportedly returned over $350 million in crypto between 2022 and 2025. The founders agreed to transfer roughly $400 million in assets for victim compensation, but some victim compensation remains to be finalized.
Potapenko and Turogin were arrested as suspects in November 2022. They received 16 months in custody, considered as time served, with Seattle Federal Court Judge Robert Lasnik giving them time served at sentencing in August 2025. The sentencing does not include imprisonment, but rather probation, community service, and a fine.
Legal proceedings over the extradition of Potapenko and Turogin lasted for an extended period. Despite court orders to remain in the U.S., the Department of Homeland Security issued deportation notices causing confusion. The pair expressed wishes to return home.
The founders used the money obtained through the fraud to purchase real estate and luxury cars. Total losses estimated around $300 million, with millions diverted for personal luxury purchases.
This case highlights the importance of transparency and accountability in the cryptocurrency industry, and serves as a reminder for investors to thoroughly research before investing in any scheme.
Technology and finance intersected significantly in the HashFlare case, with the accused, Sergei Potapenko and Ivan Turõgin, using technology to execute a Ponzi scheme that defrauded investors worldwide. The general-news story involves crime and justice, as Potapenkin and Turõgin were convicted for their role in the $577 million scam, which primarily revolved around cryptocurrency mining.
