US appeals time served sentences for HashFlare Ponzi schemers
U.S. prosecutors have appealed the sentences of time served that were handed down to Sergei Potapenko and Ivan Turõgin, the co‑founders of HashFlare, arguing the pair should receive prison terms of about ten years. The appeal was filed with the U.S. Court of Appeals for the Ninth Circuit after a Seattle federal judge sentenced the men to time served on Aug. 12, along with a $25,000 fine and an order to complete 360 hours of community service while on supervised release.
Potapenko and Turõgin were arrested in October 2022 and spent roughly 16 months in custody in Estonia before being extradited to the United States in May 2024. After their extradition they pleaded guilty to conspiracy to commit wire fraud relating to HashFlare, a crypto mining service that prosecutors say operated as a $577 million Ponzi scheme between 2015 and 2019.
The government contends HashFlare’s operators posted fabricated dashboards that overstated mining capacity and investor returns, and that the company used funds from new customers to pay existing members — conduct prosecutors describe as a classic Ponzi scheme that inflicted serious harm on victims. Based on the scale of the alleged fraud and the harm to victims, prosecutors asked the court for sentences of about ten years in prison.
Defence lawyers for Potapenko and Turõgin urged the court to impose only time served. They argued that although HashFlare exaggerated its mining capacity, customers ultimately received crypto assets worth more than their initial investments due to subsequent market price increases. The defense also said victims would be made whole from more than $400 million in assets that were forfeited as part of the defendants’ plea agreement.
Prosecutors pushed back, saying the defence’s account relied on fabricated data and that the claim victims were already repaid was inaccurate. The government maintains the forfeited assets and other claims do not justify the light sentences imposed by the district court.
The appeal comes amid broader concern from blockchain investigators and industry observers about perceived leniency in some crypto enforcement actions. Commentators have warned that inconsistent or light punishments for high‑profile crypto crimes can reduce deterrence and encourage further fraud.
The HashFlare case is being cited alongside other recent crypto Ponzi prosecutions in which courts imposed prison terms. For example, a court recently sentenced a defendant to 2.5 years for defrauding investors in a mining scheme, and another defendant received an eight‑year sentence for a separate $40 million crypto Ponzi operation. Separately, reported crypto crime losses reached a record high in the first half of 2025, underscoring regulators’ and prosecutors’ heightened scrutiny of large scams.
The Ninth Circuit will now review the government’s appeal of the sentence to determine whether the district court’s decision to impose time served should be overturned or affirmed.
