US prosecutors appealed the sentence of time served given to the co-founders of HashFlare, a crypto mining service and $577 million Ponzi scheme.
Prosecutors instructed a Seattle federal court docket on Tuesday that the federal government was interesting the sentences that it handed down earlier this month to Sergei Potapenko and Ivan Turõgin to the Ninth Circuit.
Potapenko and Turõgin have been in custody for 16 months of their native Estonia after their arrest in October 2022 and have been extradited to the US in May 2024, the place they pleaded responsible to conspiracy to commit wire fraud.
The authorities had argued that the pair ought to get 10 years in jail, saying that the HashFlare scheme precipitated severe hurt to victims and was probably the most vital fraud the court docket had ever tried. Potapenko and Turõgin argued for time served.
On Aug. 12, Seattle Federal Court Judge Robert Lasnik sentenced the pair to time served, a $25,000 fantastic and ordered them to finish 360 hours of group service whereas on supervised launch, which is predicted to be served in Estonia.
Blockchain crime investigators and companies have flagged a scarcity of great penalties and dropped enforcement actions towards unhealthy actors as key drivers for crypto crime, as a consequence of a perceived lack of penalties for legal acts.
HashFlare founders say victims have been repaid
Prosecutors mentioned that between 2015 and 2019, HashFlare’s gross sales totaled over $577 million, and the co-founders posted faux dashboards that falsely reported the agency’s mining capability and the returns buyers have been making from the scheme.
Existing members have been paid out with funds from newer prospects, which the federal government mentioned “proved to be a basic Ponzi scheme.”
Lawyers for Potapenko and Turõgin argued that regardless of overstating HashFlare’s mining capability, the corporate’s prospects in the end acquired crypto value excess of their preliminary investments, primarily from the rise in crypto market costs for the reason that scheme closed.
They additionally mentioned victims could be paid in full from the greater than $400 million value of property forfeited as a part of Potapenko and Turõgin’s plea deal in February. However, prosectors alleged that the information was fabricated, and these arguments have been inaccurate.
Sleuths warn lack of penalties for unhealthy actors
Blockchain investigators ZachXBT and Taylor Monahan mentioned in June that crypto court docket instances deserted by US regulators and a perceived lack of great penalties for unhealthy actors working scams have been serving to gasoline crypto crime.
Experts instructed Cointelegraph final month that, in some instances, regulators have swung from overreach to underreaction, with early enforcement actions usually being harsh; there has now been a swing to the opposite approach, the place there’s little accountability.
Related: Key participant in $13M crypto Ponzi scheme pleads responsible
Crypto crime losses hit a brand new report within the first half of 2025, beating the earlier report set in 2022 and practically equal to the overall losses from all of 2024.
Other Ponzi operators have been jailed
Former rugby participant Shane Donovan Moore was sentenced to two-and-a-half years behind bars in July for defrauding greater than 40 buyers out of $900,000 in a crypto mining Ponzi scheme.
Meanwhile, Dwayne Golden was convicted of wire fraud and cash laundering and sentenced to eight years in June for his function in a $40 million crypto Ponzi scheme operated by three digital asset companies, EmpowerCoin, ECoinPlus, and Jet-Coin.
Magazine: ETH ‘god candle,’ $6K subsequent? Coinbase tightens safety: Hodler’s Digest, Aug. 17 – 23
