Estonian Duo Admit $577M Crypto Ponzi Scheme, Agree to Return $400M

Two Estonian nationals, Sergei Potapenko and Ivan Turõgin, have admitted guilt in a $577 million cryptocurrency Ponzi scheme known as HashFlare. The defendants pleaded guilty on Wednesday and agreed to return $400 million in assets earned through their fraudulent activities.

The scheme, which operated between 2015 and 2019, promised cryptocurrency mining profits to customers through HashFlare. However, the company lacked the necessary computing power to conduct most of the mining it claimed to perform. Instead, the defendants diverted funds from newer investors to pay returns to their initial investors in a classic Ponzi scheme manner. The stolen money was used to purchase luxury vehicles, real estate, and business investments.

Potapenko and Turõgin submitted guilty pleas and agreed to surrender assets valuing more than $400 million. The returned assets will be used to compensate victims in the remission process. The two defendants admitted their guilt before courts for their involvement in wire fraud conspiracy charges and face up to 20 years behind bars.

The U.S. Justice Department recognized the Estonian Cybercrime Bureau of Police and Border Guard for their crucial support during the investigation. The Estonian Prosecutor General collaborated with the Ministry of Justice during the extradition process, and the Justice Department’s Office of International Affairs provided essential backing to investigators.

The case serves as a reminder of the serious effects that criminal schemes in cryptocurrency operations can have on investors. Authorities promise continued protection of investors and legal action against such schemes.