The co-founder of Defunct Crypto Mining Service asked Hashflare to spare additional prison hours after admitting to wire fraud, but prosecutors say they deserve a decade in prison for adjusting the $577 million Ponzi scheme.
In a memo from the ruling filed Wednesday to Seattle Federal Court Judge Robert Lasnik, prosecutors argued that Sergei Potapenko and Ivan Tagen deserve 10 years of prison for “terrifying crimes” that each caused around $300 million in losses to the victim.
Prosecutors argued that the 10-year sentence was the biggest fraud that the court has ever attempted, but Potapenko and Turāgin said that a memo for their sentence was filed on the same day.
The pair were arrested in Estonia in November 2022 and were behind the bar for 16 months before being extradited to the US in May 2024. They are on bail in the US on the August 14 sentencing hearing set.
Hashflare did not cause any losses, the founder argues
Potapenko and Tuturāgin’s lawyers argued that despite exaggerating Hashflare’s mining capabilities, the company’s clients ultimately received much more value than their original investment.
They alleged that 390,000 customers who spent $487 million on a hash flare mining contract had withdrawn $2.3 billion, claiming that the clients had not experienced as many financial difficulties as prosecutors.
The duo said all potential victims will be paid in full. Perhaps from over $400 million in assets confiscated as part of a plea deal in February.
Prosecutors are a pair who committed “terrifying crimes”
In filing the verdict, prosecutors focused on the enormous scale and scale of hashflare fraud, calling it a “terrifying crime,” causing a loss of around $300 million to the victim.
They said the pair sold $577 million worth of mining contracts to around 440,000 customers between 2015 and 2019, posted fake investors returns and paid with funds from new customers.
sauce: Arkham Intelligence
“Hashflare proved to be a classic Ponge plan,” the prosecutor alleged.
They added that the sentence must “reflect the severity of the crime,” and that it must serve as a “appropriate deterrence” to protect the public from future crimes of a similar nature.
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Prosecutors dismissed the idea that an Estonian court should have heard of the case, noting that over 50,000 Hashfraa’s 440,000 clients are based in the US and have raised and invested more than $130 million in the scheme.
Hashflare founder wants to go home
Potapenko and Tutulāgin are seeking deportation to their hometown of Estonia. It has spurred potential impacts on the way US courts treat foreigners in cross-border code crime cases.
The court that ordered them to stay in the United States said it received a letter in April from the Department of Homeland Security directing them to be “immediately deported.”
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