Two Estonian individuals named Sergei Potapenko and Ivan Turõgin, both 40, are now facing up to 20 years in prison after pleading guilty to running a bogus cryptocurrency mining company dubbed HashFlare that made over $577 million between 2015 and 2019. They were first arrested in Tallinn in 2022 and later extradited to the US.
The company formed by the duo wasn’t capable of mining crypto at the scale the investors had been promised. As is the case with typical Ponzi schemes, earlier investors were paid with the money raked in from newer spenders until the number of users wanting to withdraw their fictitious profits exceeded what the company could pay out. Customer-facing dashboards were populated with fake mining data to make the entire user experience more believable.
Regardless, the duo ended up using the stolen funds to buy real estate and luxury vehicles. According to the US Department of Justice, at the time of the plea, the duo agreed to forfeit assets worth nearly $400 million. Potapenko and Turõgin each pleaded guilty to one count of conspiracy to commit wire fraud. They are scheduled to be sentenced on May 8, and each faces a maximum penalty of 20 years in prison. The guilty plea could give them shorter jail terms.
This isn’t the duo’s first crypto-related offence either. Infosecurity reported on a second allegedly fraud investment scheme they launched in 2017. The scam was in the form of a fake bank this time, raising nearly $25 million without ever actually existing.
Both schemes used shell companies, shady contracts, and fake invoices to launder money to their bank accounts. The final count of property acquired with the stolen funds stands at least 75 properties, six luxury vehicles, and thousands in cryptocurrency wallets and mining machines. The forfeited assets will be available for a remission process to compensate victims of the crime. Details about the remission process will be announced at a later date.
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