• HashFlare founders request no extra jail after 16 months in Estonian custody.

• US prosecutors call it a $577M fraud with $300M in victim losses.

• Defendants claim customers withdrew $2.3B and will be fully repaid.

• Sentencing set for August 14 and could affect cross-border crypto cases.

HashFlare co-founders Sergei Potapenko and Ivan Turõgin have asked a U.S. court to limit their punishment to the 16 months they spent in Estonian custody before being extradited. The pair pleaded guilty to conspiracy to commit wire fraud in May 2024 after arriving in the U.S.

Their sentencing hearing is scheduled for August 14 in a Seattle federal court. In a written submission, the defendants argued that their cooperation and time served abroad justify leniency. They are currently out on bail while awaiting the hearing.

They also noted that they are willing to forfeit over $400 million in assets as part of their plea agreement. Their legal team claimed that full repayment to all affected parties is expected from those seized assets.

Prosecutors Demand Long-Term Sentences for HashFlare Co-Founders

Federal prosecutors have pushed for a 10-year sentence for each defendant, calling the case the largest crypto-related fraud the court has faced. In a memo to Judge Robert Lasnik, the government stated that the scheme generated around $300 million in actual losses.

Between 2015 and 2019, the pair sold more than $577 million in fake mining contracts to over 440,000 customers. Prosecutors say they used new investments to pay old ones, creating the illusion of legitimate profits.

The government described the operation as a “classic Ponzi scheme” that funded the defendants’ personal luxuries. Prosecutors emphasized that the sentence must reflect the scale of the crime and prevent future schemes of similar nature.

HashFlare Co-Founders Dispute Over Financial Losses

Potapenko and Turõgin argued that while HashFlare overstated its mining capacity, customers still received high returns due to rising crypto prices. They claimed that around 390,000 customers withdrew a total of $2.3 billion, which exceeded the original $487 million spent on contracts.

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Their legal team maintained that these outcomes lessen the financial damage caused and reduce the need for further incarceration. They also argued that since full repayment is planned, further jail time would not serve justice.

However, prosecutors rejected this reasoning, stating that customer withdrawals were only possible through deceitful practices. They emphasized that investor returns were faked, and customer funds were misused, regardless of market price changes.

Cross-Border Jurisdiction Questions Remain

The case continues to raise jurisdictional questions regarding how U.S. courts handle foreign nationals in global crypto fraud cases. Potapenko and Turõgin were arrested in Estonia in November 2022 and extradited to the U.S. nearly 18 months later.

Despite a court order requiring them to stay in the U.S., the pair claimed they received a notice from the Department of Homeland Security requesting immediate deportation. This contradiction has created confusion about their legal status.

Over 50,000 HashFlare customers were based in the U.S., with $130 million coming from American users. Prosecutors used this to support trying the case in the U.S. court system rather than in Estonia.

The HashFlare sentencing will be closely watched and could shape how authorities pursue crypto-related crimes that span across countries.