The co-founders of the defunct crypto mining service HashFlare requested a US choose to spare them further jail time after admitting to wire fraud, however prosecutors mentioned they deserve a decade in jail for orchestrating a $577 million Ponzi scheme.
In a sentencing memo submitted on Wednesday to Seattle Federal Court Judge Robert Lasnik, prosecutors argued Sergei Potapenko and Ivan Turõgin every deserve 10 years in jail for his or her “horrible crime” that precipitated about $300 million in sufferer losses.
Prosecutors argued {that a} decade-long sentence can be simply, as HashFlare was the most important fraud the courtroom had ever tried. Potapenko and Turõgin mentioned of their sentencing memo filed the identical day that the sentence can be extreme, citing their cooperation and time already served in Estonian custody.
The pair was arrested in Estonia in November 2022 and was behind bars for 16 months earlier than being extradited to the US in May 2024, the place they pleaded responsible to conspiracy to commit wire fraud. They are out on bail within the US with their sentencing listening to set for Aug. 14.
HashFlare didn’t trigger losses, founders argue
Lawyers for Potapenko and Turõgin argued of their joint sentencing memo that regardless of overstating HashFlare’s mining capability, the corporate’s clients in the end obtained crypto value way over their preliminary investments, primarily from the rise in crypto market costs for the reason that scheme closed.
They argued that 390,000 clients who spent $487 million on HashFlare mining contracts have since withdrawn $2.3 billion, and claimed clients haven’t skilled as a lot monetary hardship because the prosecutors have made out.
The duo mentioned each potential sufferer might be paid in full, doubtless from the greater than $400 million value of belongings forfeited as a part of their plea deal in February.
Pair dedicated “horrible crime,” prosecutors say
In their sentencing submission, prosecutors targeted on the sheer measurement and scale of HashFlare’s fraud, calling it a “horrible crime” that precipitated round $300 million in sufferer losses, with a lot of the proceeds used to fund Potapenko and Turõgin’s “lavish life.”
They mentioned the pair bought $577 million value of mining contracts to about 440,000 clients between 2015 and 2019, posting faux investor returns and paying them out with funds from newer clients.
“HashFlare proved to be a basic Ponzi scheme,” prosecutors mentioned.
They added that the sentence should “replicate the seriousness of the offense,” and function “satisfactory deterrence” to guard the general public from future crimes of an analogous nature.
Related: Crypto scammer will get 12 years after reneging on restitution deal
Prosecutors dismissed the concept that an Estonian courtroom ought to have heard the case, noting that over 50,000 of HashFlare’s 440,000 clients had been based mostly within the US and collectively invested greater than $130 million into the scheme.
HashFlare founders need to return residence
Potapenko and Turõgin are nonetheless in search of deportation to their native Estonia — prompting potential implications for a way US courts deal with overseas nationals in cross-border crypto crime circumstances.
Despite a courtroom ordering them to remain within the US, the pair mentioned in April that they obtained a letter from the Department of Homeland Security directing them to “deport instantly” — inflicting appreciable confusion over their futures.
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