tl;dr
Hashflare founders Sergei Potapenko and Ivan Turõgin have pled guilty to wire fraud conspiracy. The Department of Justice dropped nearly 20 charges and the founders are cooperating in hopes of receiving lighter sentences. The founders admitted to defrauding investors of $575 million, but emphasized ...
Hashflare founders Sergei Potapenko and Ivan Tur�gin have pleaded guilty to wire fraud conspiracy. The Department of Justice dropped nearly 20 charges, and the founders are cooperating in hopes of receiving lighter sentences. The founders admitted to defrauding investors of $575 million but emphasized that no customers were harmed. They have agreed to forfeit assets and provide consumer data for reimbursement efforts. The prosecution's case was marred by serious errors, leading to negotiations for a reduced sentence. The outcome of their sentencing remains uncertain.
Before it all came crashing down, HashFlare was ostensibly a reputable cloud mining business. However, Estonian co-founders Sergei Potapenko and Ivan Tur�gin were arrested in 2022 and charged with defrauding investors out of $575 million. After a lengthy legal battle, HashFlare’s co-founders pled guilty to wire fraud conspiracy today.
Sponsored Sponsored “As Ivan admitted today, one of his and Sergei’s businesses promised to mine crypto and did in fact mine crypto, but not as much as it had promised. Instead, it sometimes repaid customers with crypto it had purchased on the open market. Importantly, however, as we will show at sentencing, no customer has suffered any harm,” said a defense lawyer.
The FBI claimed that the site operated like this from 2015 to 2018, at which point they “invoked a clause in HashFlare’s terms of service that allowed it to shut down if it had been unprofitable for 28 days.” Most user funds went straight to their enrichment. Still, as they claimed in their guilty plea, the founders showed regret and a desire to pay back their users. To that end, they agreed to forfeit all frozen assets and provide consumer data to help reimbursement efforts. These assets include several luxury cars and real estate.
However, these actions and a guilty plea aren’t enough to reduce the HashFlare co-founders’ sentence: the prosecution erred greatly. Specifically, the DoJ claimed that the pair managed to move $95 million in cryptoassets after their arrest, proving “that they lied to pretrial services and could not be trusted.” However, the Federal prosecutors’ key witness was wholly discredited, and the proceedings became somewhat farcical. To name one example of these serious errors, prosecutors were forced to concede that they overrepresented damages by $225 million. From here, negotiations commenced to salvage some semblance of justice. The HashFlare executives pled guilty to one charge, while almost 20 others were thrown out altogether. It’s unclear what sentence they’ll receive, but it could be much worse.
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