Two Estonians Plead Guilty to Running $577M Crypto Ponzi Scheme

Two Estonian nationals pleaded guilty to orchestrating a $577 million cryptocurrency fraud scheme, the US Department of Justice (DOJ) announced on Thursday.

Sergei Potapenko and Ivan Turõgin, both 40, defrauded hundreds of thousands of victims by promoting fake investment opportunities through their fraudulent crypto-mining service, HashFlare. Between 2015 and 2019, HashFlare collected over $577 million from investors.

According to prosecutors, the defendants misappropriated the funds instead of using them for legitimate investments, funneling the stolen money through shell companies and luxury purchases such as high-end real estate.

Crypto Scams and Hacks

The DOJ’s conviction highlights the increasing regulatory focus on cryptocurrency fraud and scams. The case is also part of a broader effort to curb financial crimes in the crypto space, which remains vulnerable to security breaches and scams.

In January alone, cryptocurrency hacks led to $74 million in losses, with centralized finance (CeFi) platforms bearing the brunt of the attacks, according to cybersecurity firm Immunefi. While this represents a 45% decrease from the same period last year, the persistence of security threats highlights the ongoing risks within the industry.

Potapenko and Turõgin each pleaded guilty to one count of conspiracy to commit wire fraud and are scheduled for sentencing on May 8. They each face a maximum penalty of 20 years in prison.

As part of their guilty pleas, the DOJ ordered the defendants to hand over assets valued at over $400 million. The forfeited assets will be used to compensate victims through a remission process, with further details to be announced later.