Sergei Potapenko and Ivan Turogin, co-founders of the cryptocurrency cloud mining service HashFlare, have pleaded guilty to charges of conspiracy to commit wire fraud.
The US Department of Justice accused HashFlare of operating as a fraudulent investment scheme, misleading investors about the profitability and operational scale of its purported mining activities. Prosecutors contend investor returns were largely funded by new participant deposits, characterizing the operation as a Ponzi scheme.
Despite arguments from the defendants that approximately $400 million worth of cryptocurrency was returned to users, federal prosecutors strongly refute this negates the underlying fraud and emphasize the significant harm suffered by victims. The government is seeking a 10-year prison sentence for each co-founder.
Potapenko and Turogin were initially indicted in late 2022, subsequently arrested in Estonia, and extradited to the United States earlier this year to face charges.