Estonian nationals plead guilty in $577M crypto scam, agree to return $400M; sentencing set for May 8, facing 20 years.
Two Estonian nationals, Sergei Potapenko and Ivan Turõgin, admitted guilt on Wednesday for running a large-scale cryptocurrency Ponzi scheme. The scammers ran their scheme known as HashFlare to fool victims from across the world, who numbered hundreds of thousands and included substantial numbers of US-based people. Through their admissions of guilt the defendants agreed to hand over $400 million in assets earned by their fraudulent activities.
Potapenko and Turõgin aged 40 years were recorded in court documents for selling contracts which promised cryptocurrency mining profits to their customers through HashFlare. The mining process of cryptocurrency depends on computer systems to produce digital funds including Bitcoin while generating profits Between 2015 and 2019, HashFlare’s sales exceeded $577 million. However, the company lacked the necessary computing power to conduct most of the mining it claimed to perform.
Users of the company dashboard encountered false profit reports due to fraudulent display technology. The reality showed that the defendants diverted funds from newer investors to pay returns to their initial investors in a classic Ponzi scheme manner. The stolen money went toward purchasing luxury vehicles as well as real estate and business investments.
Potapenko and Turõgin Admit Guilt, Will Return $400M to Crypto Ponzi Scheme Victims
The defendants Potapenko and Turõgin submitted guilty pleas after which they agreed to surrender assets valuing more than $400 million. The returned assets will serve the remission process to compensate victims according to information the authorities will reveal at later stages.
The two defendants admitted their guilt before courts for their involvement in wire fraud conspiracy charges. Law enforcement has set May 8 as the date to punish Potapenko and Turõgin who can receive up to 20 years behind bars. Other legal considerations besides U.S. Sentencing Guidelines will determine the judge’s sentencing decision for both defendants.
The Justice Department of the United States recognized the Estonian Cybercrime Bureau of Police and Border Guard for their crucial support during the investigation. During the extradition process the Estonian Prosecutor General collaborated with the Ministry of Justice to achieve their mutual objectives. The Justice Department’s Office of International Affairs provided essential backing to investigators when handling the overall investigation and subsequent extradition steps.
The case shows how criminal schemes in cryptocurrency operations lead to serious effects for investors, yet authorities promise protection of investors and continued legal action.
