$400M in Crypto Ponzi Case as Estonian Fraudsters Plead Guilty

The U.S. Attorney’s Office for the Western District of Washington has secured $400 million in asset forfeiture as part of a guilty plea from two Estonian nationals who orchestrated a $577 million crypto Ponzi scheme.

🔹 Sergei Potapenko and Ivan Turõgin, both 40, pleaded guilty to conspiracy to commit wire fraud after deceiving investors through their company, HashFlare.
🔹 The duo falsely promised crypto mining contracts but lacked the computing power to execute legitimate mining operations.
🔹 Instead, they used falsified data to create an illusion of success, scamming thousands of investors.

As part of their plea agreement, they will forfeit assets, including real estate, luxury cars, and cryptocurrency holdings.

How the $577M HashFlare Crypto Scam Unfolded

Between 2015 and 2019, HashFlare attracted over $577 million in sales, marketing itself as a cloud mining service. However, the company never had the computing power to mine the promised cryptocurrencies.

📌 “HashFlare did not possess the requisite computing capacity to perform the vast majority of the mining,” said the U.S. Attorney’s Office in a statement on Thursday.

Authorities found that investors were misled through manipulated data, making it appear as though their mining contracts were profitable when, in reality, the operation was fraudulent.

Polybius ICO Scam: Another $31M Fraudulent Scheme

Potapenko and Turõgin also admitted to running another fraudulent operation, Polybius, an Initial Coin Offering (ICO) for a supposed digital bank.

🔹 In 2017, Polybius raised approximately $31 million from investors.
🔹 However, the funds were never invested into a banking project, and no dividends were ever paid to investors.
🔹 Instead, the duo funneled the money for personal use, purchasing luxury assets and real estate.

📌 “Instead of using the proceeds to create a digital bank, Turõgin and Potapenko used a large portion of the proceeds for their own personal benefit,” said the FBI’s Seattle Office.

Money Laundering & International Law Enforcement Crackdown

The U.S. Attorney’s Office and the FBI allege that the defendants laundered stolen funds through:

🔹 At least 75 properties
🔹 Six luxury vehicles
🔹 Crypto wallets holding stolen assets
🔹 Thousands of crypto mining machines

The FBI’s Seattle Field Office, working alongside international law enforcement, led efforts to apprehend and extradite the criminals from Estonia.

📌 Both men were arrested in Tallinn, Estonia, on November 20, 2022, and later extradited to the U.S.

The FBI has also set up a dedicated website for victims of the HashFlare scam to submit claims.

U.S. Crackdown on Crypto Fraud Continues

The guilty plea and $400 million asset forfeiture are part of a broader crackdown by U.S. authorities against crypto-related fraud.

📌 In early 2024, the U.S. Attorney’s Office for the Western District of Washington secured a record-breaking $1.51 billion in fines.
📌 The largest penalty came from Binance, which agreed to a $4.3 billion settlement for violating U.S. regulations.

With law enforcement ramping up crypto fraud investigations, this case serves as a warning to fraudulent crypto operators worldwide.

Conclusion: Crypto Fraud Crackdown Gains Momentum

📌 Estonian nationals Sergei Potapenko and Ivan Turõgin pleaded guilty to operating a $577M crypto Ponzi scheme.
📌 They also admitted to a separate $31M ICO fraud through the Polybius digital bank scam.
📌 The U.S. has seized $400M in assets, including real estate, luxury cars, and crypto holdings.
📌 Law enforcement agencies are intensifying their crackdown on fraudulent crypto schemes.

As sentencing approaches on May 8, authorities continue to hold crypto fraudsters accountable, signaling greater regulatory oversight in the crypto space.

🚀 Will stricter regulations prevent future crypto scams?