Prosecutors Argue Strong Risk of Flight in Case Against Leaders of Alleged HashFlare Cryptocurrency Ponzi Scheme

News | June 25, 2024 By:

On Tuesday, June 11, 2024, the US government filed court documents seeking to detain two foreign nationals charged in a massive cryptocurrency Ponzi scheme.

According to documents filed in the US District Court for the Western District of Washington, Sergei Potapenko and Ivan Turõgin are accused of running HashFlare, a cloud mining contract service that operated as a Ponzi scheme from 2015 to 2019. Prosecutors allege HashFlare defrauded investors of approximately $575 million by selling mining capacity they did not actually have.

Through cloud mining contracts, HashFlare offered customers the ability to profit from bitcoin and altcoin mining by purchasing blockchain processing power on their “Cloud Machine.” Customers could track profits and expenses through an online dashboard. However, prosecutors claim the dashboard figures were fabricated and that HashFlare owned less than 1% of the mining capacity it contracted.

When customers requested payouts, prosecutors allege HashFlare used new investor funds to buy cryptocurrency on the open market rather than distributing legitimately mined coins. This, along with evidence HashFlare’s business records show it oversold contracts and employee testimony that company leadership knew of capacity shortfalls, supports fraud charges.

Financial records revealed HashFlare used shell companies like Ecohouse and Dalmeron to launder and transfer investor funds. Prosecutors say Potapenko and Turõgin provided falsified contracts and invoices to disguise transactions totaling over $109 million between these entities.

Due to the alleged fraudulent activity, prosecutors are pushing for detention instead of bail for the two defendants. They argue Potapenko and Turõgin pose a severe flight risk as foreign nationals facing life sentences who still have access to approximately $160 million in unrecovered cryptocurrency.

Prosecutors cited other fraud cases from the district where defendants fled before sentencing, and highlighted courts’ history of detaining extradited foreign nationals. They claim proposed bond terms, including amounts as low as $1 million secured overseas, fail to ensure appearance.

Please contact BlockTribune for access to a copy of this filing.