US prosecutors have appealed the lenient sentences given to Sergei Potapenko and Ivan Turõgin, co-founders of the cryptocurrency mining service HashFlare. The duo carried out a massive $577 million Ponzi scheme.
The appeal was filed in a Seattle federal court on Tuesday, challenging the time-served sentences handed down on August 12 by Judge Robert Lasnik to the Ninth Circuit Court of Appeals.
Potapenko and Turõgin, arrested in Estonia in October 2022, spent 16 months in custody before their extradition to the US in May 2024.
They pleaded guilty to conspiracy to commit wire fraud.
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Prosecutors argued for a 10-year prison term, emphasizing the severe harm caused to victims and describing the scheme as the largest fraud case ever tried in the court. However, the founders requested time served, and Judge Lasnik sentenced them to time served, a $25,000 fine each, and 360 hours of community service during supervised release, likely to be served in Estonia.
HashFlare’s Deceptive Operations
Between 2015 and 2019, HashFlare amassed over $577 million in sales by displaying fake dashboards that misrepresented the company’s mining capacity and investor returns.
Prosecutors labeled it a “classic Ponzi scheme,” as funds from new investors were used to pay existing ones.
The founders’ legal team claimed that customers ultimately profited due to the rising cryptocurrency market prices after HashFlare’s closure.
They said that victims would be fully compensated through over $400 million in forfeited assets from the February plea deal.
Prosecutors, however, disputed these claims, alleging the data was fabricated.
Crypto Crime and Lack of Accountability
Blockchain investigators, including ZachXBT and Taylor Monahan, have highlighted a lack of significant consequences for crypto criminals as a key factor driving ongoing scams.
In June, they noted that abandoned court cases and lenient penalties contribute to the persistence of crypto-related crime.
Experts say that regulatory approaches have shifted from overly harsh early enforcement to inadequate accountability in recent cases.
Crypto crime losses reached a record high in the first half of 2025, surpassing the previous peak set in 2022 and nearly matching the total losses for all of 2024.
Ponzi Scheme Convictions
In contrast to the HashFlare case, other Ponzi scheme operators have faced stricter penalties.
In July, former rugby player Shane Moore received a 2 and a half year sentence for defrauding over 40 investors of $900k in a crypto mining scam.
Similarly, in June, Dwayne Golden was sentenced to eight years for wire fraud and money laundering in connection with a $40 million Ponzi scheme that involved 3 digital asset firms:
EmpowerCoin, ECoinPlus, and Jet-Coin.
