- HashFlare services caused a $577 million Ponzi scheme, deceiving global investors.
- Sergei Potapenko and Ivan Turõgin could face up to 20 years in prison.
The co-founders of HashFlare pleaded guilty on Wednesday to wire fraud conspiracy after running a $577 million Ponzi scheme that scammed hundreds of thousands of investors worldwide through fake crypto mining.
The HashFlare Crypto $577M Fraud Revealed
In November 2022, two Estonian nationals were arrested by the Estonia authorities. Sergei Potapenko and Ivan Turõgin, co-founders of a cloud mining service were arrested and handed over to the United States on an 18-count indictment.
HashFlare was active from 2015 to 2019. It provided cloud mining services where users could mine cryptocurrencies like Bitcoin and Ethereum without buying or needing any expensive hardware. The idea was to buy contracts to rent hashrate from HashFlare’s mining equipment.
After an extensive investigation by the FBI, the two founders have pleaded guilty to a $577 million cryptocurrency Ponzi scheme. The investigation was reported by the U.S. Department of Justice (DOJ). Yesterday, both men pleaded guilty to a charge of conspiracy to commit wire fraud and money laundering, which could lead to a maximum sentence of 20 years in prison.
Further investigations showed that they laundered stolen funds through crypto accounts and with that funds, they acquired 75 properties, six luxury cars, and more mining equipment.
After investigations, court documents showed that HashFlare had less than 1% of the mining equipment it claimed to have, meaning the computing power Potapenko and Turõgin sold was much smaller than advertised. And when investors tried to withdraw their earnings, the two men either made excuses or paid them back using crypto bought from the market.
Additionally, HashFlare promoted a fake crypto bank called Polybius, which failed to pay the promised dividends, increasing the financial losses for investors.
Potapenko and Turõgin’s lawyers claimed that none of HashFlare’s investors actually lost money. And the only crime the men committed was lying about the size of HashFlare’s mining operation. After pleading guilty, the two men agreed to give up assets worth over $400 million, which will be used to repay victims.
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