Two Estonian founders of the defunct cloud-mining service HashFlare have been sentenced in Seattle to 16 months in prison, with the term fully credited as time already served in custody.
They won’t return to prison, but must each pay a $25,000 fine and complete 360 hours of community service while on supervised release.
Prosecutors had sought a decade-long term, and the Justice Department said it is weighing an appeal of Judge Robert S. Lasnik’s sentencing decision.
From cloud mining to mirage
From 2015 to 2019, HashFlare sold profit-sharing mining contracts while having nowhere near the computing power to mine most of the coins it claimed. Fake dashboards showed fabricated returns as more than $577 million flowed in from hundreds of thousands of victims. The founders also raised at least $25 million for a separate project called Polybius that never formed a bank or paid dividends, with funds routed to accounts they controlled.
“These defendants were operating a classic Ponzi scheme, involving a glitzy asset: a mirage of cryptocurrency mining,” said Acting US Attorney Teal Luthy Miller.
“And just like a classic Ponzi, they diverted millions of dollars to their own benefit, purchasing their own bitcoin, real estate, luxury cars, expensive jewelry, and more than a dozen trips on chartered private jets. Meanwhile, the vast majority of their victims suffered losses — in many cases, losses that had a serious impact on their financial and emotional well-being.”
Arrest, extradition and guilty pleas
Sergei Potapenko and Ivan Turõgin were arrested in Tallinn, Estonia in November 2022 on an 18-count US indictment. Estonia approved their transfer, and the pair were extradited to the United States in May 2024 after serving 16 months in Estonian custody. They pleaded guilty in February 2025 to one count each of conspiracy to commit wire fraud and agreed to forfeit assets valued at over $450 million.
Sentencing
On Tuesday 12 August, Judge Lasnik imposed time served along with fines and community service, and ordered that supervised release be served in Estonia.
Seperately, in April, the defendants’ lawyers told the court in a joint letter that both men had received emails from the Department of Homeland Security instructing them to leave the United States “immediately,” a directive that conflicted with their bond conditions requiring them to remain in Washington state until sentencing. Tuesday’s order formalises supervision in Estonia and resolves that conflict.
The sentence requires the defendants to forfeit crypto, cash, vehicles, real property, and mining equipment valued at over $450 million, to be distributed through a remission process the government will announce.
The case closes a years-long investigation into one of the largest crypto-mining frauds tried in the US, with a path now set to compensate the victims with seized assets.
