US Appeals “Lenient” Sentences for HashFlare Founders in $577M Ponzi Case

TLDR

• Prosecutors appeal lenient sentences for HashFlare founders involved in a $577M Ponzi scheme.

• Defendants were sentenced to time served, supervised release, and fines after defrauding 440,000 victims.

• The appeal targets the court’s decision to reduce sentences despite the scale of the fraud.

• Experts argue lenient sentencing may undermine deterrence for future financial crimes in crypto.

Federal prosecutors have appealed the lenient sentences handed down to Sergei Potapenko and Ivan Turõgin, founders of the $577 million Ponzi scheme involving the HashFlare cryptocurrency mining service. The two Estonian nationals were initially sentenced to time served, three years of supervised release, and fines of $25,000 each. This decision, issued by Judge Robert S. Lasnik, has sparked significant controversy, with many viewing it as unusually lenient given the scale of the fraud.

The prosecutors’ appeal, filed with the Ninth Circuit Court of Appeals, argues that Potapenko and Turõgin should have faced much harsher penalties, including prison sentences of up to 10 years. The government contends that the lenient punishment does not adequately reflect the severity of the crime, which defrauded over 440,000 victims worldwide.

 HashFlare Founders Crime and Sentencing Debate

In February 2025, Potapenko and Turõgin pleaded guilty to conspiracy charges related to the operation of the Ponzi scheme through HashFlare. The scheme ran from 2015 to 2019, during which the defendants used fake mining dashboards to lure in investors.

They promised high returns but were instead diverting funds to personal luxuries and buying Bitcoin to pay early investors.

Despite the significant financial harm caused, Judge Lasnik opted for what some legal experts are calling an “unusually lenient” sentence. According to the defense, the two founders had already served 16 months in custody in Estonia before being extradited to the U.S., and their cooperation in the case, along with the restitution of over $400 million worth of assets, was considered as mitigating factors.

Impact of the Lenient Sentencing

The sentencing has been met with mixed reactions. Some legal experts, like Ishita Sharma, believe that the Ninth Circuit is unlikely to overturn the sentence, as the judge’s reasoning was based on clearly articulated factors, including the defendants’ immigration risks and the logistical challenges surrounding their imprisonment.

Sharma added that the Ninth Circuit usually defers to district judges unless the sentence is deemed “unreasonably lenient.”

However, others, such as blockchain crime investigators, argue that lenient sentences for large-scale frauds could undermine the deterrent effect of sentencing. They caution that if major players in the crypto industry are not held accountable with severe punishments, it could lead to more financial crimes in the future, particularly within the decentralized finance space.

Prosecutors and Defense Perspectives

The U.S. government’s argument in its appeal centers around the severity of the crime, highlighting that the fraud was one of the largest ever prosecuted in the Western District of Washington. Prosecutors point to the fact that the defendants preyed on a large number of victims, many of whom were left with nothing after being promised high returns.

The appeal seeks a harsher penalty to better align with the damage caused and to send a stronger message to other potential offenders in the crypto space.

On the other hand, the defense maintains that the sentence was justified based on the defendants’ lack of prior criminal history, their cooperation in the case, and the restitution provided. They argue that the sentence was not only reasonable but also in line with U.S. sentencing guidelines, given the complexities of the case.

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