Crypto News

Justice Served: Estonian Nationals Plead Guilty in $577 Million Crypto Ponzi Scheme, Forfeiting $400 Million in Assets

February 14, 2025
Smart Money

U.S. Attorney’s Office Secures $400 Million in Asset Forfeiture from Estonian Nationals in Crypto Ponzi Scheme

The U.S. Attorney’s Office for the Western District of Washington has successfully obtained $400 million in asset forfeiture following a guilty plea from two Estonian nationals involved in a substantial cryptocurrency Ponzi scheme. Sergei Potapenko and Ivan Turõgin, both 40 years old, pleaded guilty to conspiracy to commit wire fraud after orchestrating a fraudulent operation that resulted in $577 million in sales through their company, HashFlare.

Details of the Scheme

Between 2015 and 2019, the duo marketed and sold crypto mining contracts that promised significant returns, claiming to operate a successful mining venture. However, the U.S. Attorney’s Office revealed that HashFlare lacked the necessary computing power to conduct any meaningful crypto mining. Instead of delivering on their promises, Potapenko and Turõgin manipulated data on their platform, presenting a misleading image of operational success to entice investors.

The guilty plea was part of a plea agreement where the defendants consented to forfeit various assets acquired through their fraudulent activities. These assets include real estate holdings, luxury vehicles, and numerous cryptocurrency accounts.

Additional Fraudulent Activities

In addition to the operations of HashFlare, Potapenko and Turõgin also admitted to launching another fraudulent venture known as Polybius. This operation, an Initial Coin Offering (ICO), aimed to create a digital bank and raised approximately $31 million in 2017. However, according to the statement issued by U.S. officials, the proceeds from this ICO were never utilized to develop the bank, nor were any dividends paid to investors. Instead, the funds were reportedly used for personal gains by the defendants, further exacerbating the fraudulent nature of their schemes.

The FBI’s Seattle office confirmed that the defendants laundered a significant portion of the proceeds through an extensive network involving at least 75 properties, six luxury vehicles, various crypto wallets, and thousands of crypto mining machines.

Arrests and Extradition

Potapenko and Turõgin were arrested on November 20, 2022, in Tallinn, Estonia, following extensive investigative efforts by the FBI’s Seattle Field Office, which collaborated with international law enforcement agencies to secure their apprehension and subsequent extradition to the United States.

As a result of their guilty plea, the defendants now face a potential sentence of up to 20 years in prison for their conspiracy to commit wire fraud. Sentencing has been scheduled for May 8, 2024.

Call for Additional Victims to Come Forward

In light of this case, the FBI is urging individuals who believe they may have fallen victim to the fraudulent HashFlare scheme to come forward. A dedicated website has been established for potential victims to submit information, as U.S. authorities continue to enhance measures aimed at holding crypto operators accountable for fraudulent practices.

Wider Context of Crypto Regulatory Actions

The guilty plea and the secured asset forfeiture are part of a larger initiative by U.S. authorities to crack down on fraudulent activities within the cryptocurrency industry. Earlier in 2024, the U.S. Attorney’s Office for the Western District of Washington made headlines for imposing record fines totaling $1.51 billion, primarily against the global crypto exchange Binance, which faced a staggering $4.3 billion settlement for violations of U.S. regulations.

This case highlights ongoing efforts in the United States to ensure accountability among crypto operators and protect investors from similar fraudulent schemes in the future.