US prosecutors have appealed the sentences of time served granted to the co-founders of HashFlare, a cryptocurrency mining service involved in a $577 million Ponzi scheme.
On Tuesday, prosecutors informed a Seattle federal court that they were challenging the sentences given earlier this month to Sergei Potapenko and Ivan Turõgin.
The two were detained for 16 months in Estonia following their arrest in October 2022, before being extradited to the US in May 2024, where they pleaded guilty to conspiracy to commit wire fraud.
The prosecution argued that the duo deserved a 10-year prison sentence, claiming the HashFlare scheme inflicted significant harm on victims and was the most substantial fraud the court had encountered. Potapenko and Turõgin contended for time served.
On August 12, Seattle Federal Court Judge Robert Lasnik sentenced them to time served, imposed a $25,000 fine, and mandated 360 hours of community service during a supervised release, which is anticipated to be served in Estonia.
Blockchain crime investigators and firms have highlighted that the absence of significant consequences and reduced enforcement actions against wrongdoers are key factors driving crypto crime, stemming from the perceived lack of accountability for criminal actions.
HashFlare founders maintain victims were reimbursed
Prosecutors indicated that from 2015 to 2019, HashFlare amassed over $577 million in sales, with the co-founders presenting fabricated dashboards that misrepresented the firm’s mining capacity and the profits investors were earning.
Funds from new customers were used to pay existing members, a situation the government labeled “a classic Ponzi scheme.”
Attorneys for Potapenko and Turõgin argued that, despite the inflation of HashFlare’s mining capacity, customers ultimately received cryptocurrencies worth substantially more than their original investments, largely due to the increase in crypto market prices since the scheme’s closure.
They also asserted that victims would be fully compensated from the over $400 million in assets forfeited as part of Potapenko and Turõgin’s plea agreement in February. However, prosecutors claimed that this information was contrived, and the arguments were misleading.
Investigator concerns over lack of repercussions for offenders
Blockchain analysts ZachXBT and Taylor Monahan stated in June that the abandonment of crypto court cases by US regulators and an apparent lack of serious repercussions for offenders engaged in scams are exacerbating crypto crime.
Experts informed Cointelegraph last month that, at times, regulators have shifted from overzealousness to inaction, where previous enforcement measures were often severe. Now, there appears to be a reversal, resulting in minimal accountability.
Related: Key player in $13M crypto Ponzi scheme pleads guilty
Crypto crime losses reached a new high in the first half of 2025, surpassing the previous record set in 2022 and nearing the total losses recorded for all of 2024.
Other Ponzi scheme operators face imprisonment
Former rugby player Shane Donovan Moore was sentenced to two-and-a-half years in prison in July for defrauding over 40 investors of $900,000 in a cryptocurrency mining Ponzi scheme.
In another case, Dwayne Golden was found guilty of wire fraud and money laundering, receiving an eight-year sentence in June for his involvement in a $40 million cryptocurrency Ponzi scheme run through three digital asset companies: EmpowerCoin, ECoinPlus, and Jet-Coin.
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