Estonian crypto businessmen agree to forfeit USD 400 mln in US

Crypto businessmen Ivan Turogin and Sergei Potapenko. Photo: Taavi Sepp / Shutterstock / Kollaaž: Mihkel Maripuu

Estonian nationals Sergei Potapenko and Ivan Turõgin, accused of cryptocurrency fraud and money laundering, pleaded guilty in a US court on Wednesday to operating a massive, multi-faceted cryptocurrency Ponzi scheme and agreed to forfeit 400 million US dollars obtained through the conspiracy.

Potapenko and Turõgin, both aged 40, each pleaded guilty to one count of conspiracy to commit wire fraud. They are scheduled to be sentenced on May 8 and each face a maximum penalty of 20 years in prison, according to the US Department of Justice.

According to court documents, Potapenko and Turõgin sold contracts to customers entitling them to a share of cryptocurrency mined by the defendants' purported cryptocurrency mining service, Hashflare. Cryptocurrency mining is the process of using computers to generate cryptocurrency, such as Bitcoin, for profit.

Between 2015 and 2019, Hashflare's sales totaled more than 577 million dollars, but Hashflare did not possess the requisite computing capacity to perform the vast majority of the mining the defendants told Hashflare customers it performed. Hashflare's web-based dashboard, which purported to show customers their mining profits, instead reflected falsified data.

Potapenko and Turõgin used the proceeds of the fraud conspiracy to purchase real estate and luxury vehicles and maintained investment and cryptocurrency accounts.

Potapenko and Turõgin have agreed to forfeit assets worth, as of the date of the plea, more than 400 million dollars. The forfeited assets will be available for a remission process to compensate victims of the crime. Details about the remission process will be announced at a later date.

The Justice Department thanks the cybercrime bureau of the Estonian Police and Border Guard for its support with this investigation. The Estonian Prosecutor General and Ministry of Justice and Digital Affairs provided substantial assistance with the extradition.

The FBI Seattle Field Office investigated the case.

Potapenko and Turõgin attempted to prevent their extradition to the United States, leading to a prolonged legal battle. After the court proceedings concluded, Estonia extradited them to the United States in late May last year. The two were arrested as criminal suspects in November 2022.