Sergei Potapenko and Ivan Turõgin admitted guilt in a wire fraud conspiracy, dodging nearly 20 other charges. In a surprising turn, prosecutors weakened their own case by overestimating claims and discrediting a key witness. The two have agreed to forfeit assets and assist in reimbursing victims, though their sentencing remains uncertain. HashFlare was once seen as a respected cloud mining business, but things unraveled in 2022 when Potapenko and Turõgin were arrested for defrauding investors of $575 million. Following a long legal battle, they pleaded guilty today. "As Ivan admitted, their business did mine crypto, but not as much as promised. Sometimes, instead of real mining profits, they repaid users with crypto bought from the market. However, no customer has suffered actual harm," their defense lawyer stated. While they accepted guilt, they tried to emphasize that the damage was limited. HashFlare lured users with the promise of mining cryptocurrency from home, but it never had enough resources to deliver. Instead, customer funds were used to buy assets, which were falsely presented as mining earnings. According to the FBI , this fraudulent scheme ran from 2015 to 2018, when HashFlare invoked a clause allowing it to shut down after 28 days of unprofitability. The bulk of user funds went to their own enrichment. However, in their guilty plea, the founders expressed regret and a willingness to pay back victims. They agreed to surrender frozen assets, including luxury cars and real estate, and to provide customer data to aid reimbursement. Despite this, their guilty plea might not be enough to significantly reduce their sentence. The prosecution made major mistakes in its handling of the case. The Department of Justice (DoJ) initially accused them of moving $95 million in crypto after their arrest, arguing that this showed they had lied to pretrial services and couldn’t be trusted. However, federal prosecutors' key witness lost credibility, weakening the case. One of the most serious missteps was an overstatement of damages by $225 million . This led to rushed negotiations to salvage some form of justice. Ultimately, the two executives pleaded guilty to a single charge while nearly 20 others were dropped. Their final sentence is still unknown, but the situation could have been far worse for them.
