Two Estonians Admit to $577 Million Crypto Fraud Scheme

Ivan Turõgin and Sergei Potapenko, both Estonians, entered guilty pleas to operating a massive Bitcoin Ponzi scam, according to confirmation from the U.S. Department of Justice (DOJ). Hundreds of thousands of investors worldwide, including many in the US, were duped by their scheme, which was based on the cloud mining service HashFlare.

Fake Mining Profits and Misleading Data

According to court documents, Potapenko and Turõgin lured customers into purchasing contracts that supposedly entitled them to a share of HashFlare’s cryptocurrency mining output. However, between 2015 and 2019, the platform generated over $577 million in sales despite lacking the computing power to support its claims.

HashFlare’s dashboard falsely displayed mining profits, misleading investors about their actual earnings. Instead of funding mining operations, the duo allegedly used the money for personal luxuries, including real estate, high-end cars, and investments in cryptocurrency.

On February 12, both men pleaded guilty to conspiracy to commit wire fraud, a charge that carries a potential 20-year prison sentence. As part of their plea agreement, they have agreed to forfeit assets worth over $400 million. These funds will be available for a remission process, allowing fraud victims to seek compensation.

A federal judge will determine their final sentencing on May 8. The case highlights the ongoing regulatory scrutiny surrounding cryptocurrency schemes and the risks faced by investors in unverified platforms.