The co-founders of HashFlare, a once-popular cloud mining service, have pleaded guilty to conspiracy to commit wire fraud in what is considered one of the largest crypto fraud cases in US history. Sergei Potapenko and Ivan Turogin, both Estonian nationals, admitted to orchestrating a $575 million scam that misled investors about HashFlare’s purported Bitcoin mining operations. Instead of delivering on their promises, the duo diverted funds into shell companies and luxury assets.
HashFlare, launched in 2015, claimed to allow users to rent hashing power to mine Bitcoin, but prosecutors revealed that the company’s operations were fraudulent. Most of the funds raised from investors were funneled into personal gains, operating more like a Ponzi scheme than a legitimate mining business. HashFlare only mined a small fraction of the Bitcoin it claimed, and payouts to investors were largely funded by new deposits rather than actual mining returns.
The scheme expanded further with the promotion of a fake banking project, Polybius Bank, where the founders convinced investors to pour over $25 million into the false promise of profit-sharing. Instead of investing the funds as claimed, the money was laundered through real estate acquisitions and luxury purchases across Europe.
In 2022, Potapenko and Turogin were apprehended in Estonia following a joint investigation by the FBI, Estonian authorities, and US prosecutors. The duo faced multiple charges of fraud and money laundering. As part of their plea agreement, both men agreed to forfeit luxury vehicles, real estate, and millions of dollars in seized cryptocurrency assets. Additionally, the founders had already repaid $350 million to the victims through cryptocurrency.
This case has been labeled by the US Department of Justice (DOJ) as one of the largest cryptocurrency frauds ever prosecuted. The sentencing hearing for Potapenko and Turogin will determine their final penalties, with both facing significant prison terms.
The HashFlare scandal is part of a growing trend of high-profile crypto fraud cases that have attracted the attention of US regulators. This case follows recent fraud admissions by blockchain companies and individual scammers, signaling heightened scrutiny of the cryptocurrency industry.
