The United States government has filed an appeal against the sentences given to the co-founders of Hashflare, a crypto mining service that was also a $577 million Ponzi scheme. The appeal was announced on Tuesday by the public prosecutor in a federal court in Seattle. Sergei Potapenko and Ivan Turõgin, the co-founders, pleaded guilty to conspiracy to commit wire fraud after being extradited to the US from Estonia in May 2024.
After their arrest in October 2022, Potapenko and Turõgin were held in custody in their homeland before being delivered to the US. The government had argued that the couple should receive 10 years in prison, citing the significant harm caused to victims and the severity of the fraud. However, the judge, Robert Lasnik, sentenced them to time served, a fine of $25,000, and 360 hours of community service, which they will complete after being returned to Estonia.
The investigators and companies specializing in blockchain crime have expressed concerns that the lack of severe consequences for bad actors is driving crypto crime. They argue that the enforcement measures against these actors are crucial, and the lack of consequences for their crimes is contributing to the problem.
Hashflare Founders Claim Victims Have Been Repaid
The prosecutors stated that Hashflare’s turnover was over $577 million between 2015 and 2019, with the co-founders using fake dashboards to incorrectly report the company’s mining capacity. The government claimed that this was a classic Ponzi scheme, where existing members were paid out with funds from newer customers. However, the lawyers for Potapenko and Turõgin argued that despite the scheme, the company’s customers ultimately received more than their initial investments in crypto, thanks to the increasing crypto market prices.
The lawyers also claimed that the victims had been repaid over $400 million in assets as part of the plea agreement in February. However, the prosecutors disputed this, stating that the data was manufactured and the arguments were inaccurate.
Experts Warn of Lack of Consequences for Bad Actors
In June, blockchain investigators ZachXBT and Taylor Monahan warned that the perceived lack of consequences for bad actors who commit fraud is driving crypto crime. Experts have noted that regulatory authorities have swung from being overly lenient to being overly strict, with early enforcement measures often being rare. Now, there is a swing in the other direction, with little accountability for bad actors.
Crypto crime has reached new records in the first half of 2025, surpassing the previous record in 2022 and almost matching the total losses in 2024. Other Ponzi operators have also been detained, including former rugby player Shane Donovan Moore, who was sentenced to two and a half years in prison for betraying over 40 investors of $900,000 in a crypto mining Ponzi scheme.
Another example is Dwayne, who was convicted of wire fraud and money laundering and sentenced to eight years in prison for operating a $40 million crypto Ponzi scheme through three digital wealth companies. These cases highlight the need for stricter enforcement measures against bad actors in the crypto space.
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