Two Estonian nationals pleaded guilty yesterday for their operation of a massive, multi-faceted cryptocurrency Ponzi scheme that victimised hundreds of thousands of people from across the world, including in the United States.
As part of the defendants’ guilty pleas, they agreed to forfeit assets valued at over $400 million obtained during the conspiracy.
According to court documents, Sergei Potapenko and Ivan Turõgin, both 40, sold contracts to customers, entitling them to a share of cryptocurrency mined by the defendants’ purported cryptocurrency mining service, HashFlare.
Cryptocurrency mining is the process of using computers to generate cryptocurrency, such as Bitcoin, for profit.
Between 2015 and 2019, HashFlare’s sales totalled more than $577 million. However, HashFlare did not possess the requisite computing capacity to perform the vast majority of the mining the defendants told HashFlare customers it performed.
HashFlare’s web-based dashboard, which purported to show customers their mining profits, instead reflected falsified data. Potapenko and Turõgin used the proceeds of the fraud conspiracy to purchase real estate and luxury vehicles and maintained investment and cryptocurrency accounts.
Potapenko and Turõgin have agreed to forfeit assets worth, as of the date of the plea, more than $400 million. The forfeited assets will be available for a remission process to compensate victims of the crime. Details about the remission process will be announced at a later date.
Potapenko and Turõgin each pleaded guilty to one count of conspiracy to commit wire fraud. They are scheduled to be sentenced on May 8, and each face a maximum penalty of 20 years in prison.
