US prosecutors have appealed the sentences of time served given to Sergei Potapenko and Ivan Turõgin, co-founders of the defunct crypto mining platform HashFlare, calling for harsher penalties over their role in a $577 million Ponzi scheme.
The two men were arrested in Estonia in October 2022, held in custody for 16 months, and later extradited to the United States in May 2024. They pleaded guilty to conspiracy to commit wire fraud. Earlier this month, Seattle Federal Court Judge Robert Lasnik sentenced them to time served, a $25,000 fine, and 360 hours of community service to be completed in Estonia.
Prosecutors argued in their appeal on Tuesday that the punishment was far too lenient, insisting both should serve 10 years in prison given the scale of the fraud, which they described as the most significant ever tried in the court. They said the pair misled investors with fake dashboards showing fabricated mining activity and returns while paying early participants with money from newer investors — a classic Ponzi setup.
HashFlare’s sales totaled over $577 million between 2015 and 2019. While defense lawyers contended that customers ultimately received crypto worth more than their original investments due to market appreciation, prosecutors rejected this claim, calling the data fabricated. They also challenged defense assertions that more than $400 million in forfeited assets would cover victim losses.
The light sentencing has sparked criticism among blockchain investigators, who warn that lack of serious consequences is emboldening bad actors in the crypto industry. Analysts note that regulators have shifted from heavy-handed early enforcement to what some describe as underreaction, leaving victims with little justice.
Crypto crime losses hit a record high in the first half of 2025, already surpassing total annual losses in 2024, according to recent industry data.
