A Seattle court has sentenced two Estonian citizens to 16 months in prison for organizing a large-scale Ponzi scheme that defrauded thousands of victims worldwide, ERR News reports.
On the 20th of November, 2022, the Estonian Criminal Police, together with the US Federal Bureau of Investigation (FBI), arrested Sergei Potapenko and Ivan Turõgin. On the 28th of May, 2024, they were extradited to the US for trial. The defendants have already spent 16 months in custody awaiting trial, so they have served their sentences, and it is expected that both will return to Estonia. However, US District Judge Robert S. Lasnik also sentenced the fraudsters to 360 hours of community service and a fine of 25,000 dollars each.
Acting US Attorney Teal Luthy Miller said in an official press release that the defendants created a classic pyramid scheme, offering a beautiful illusion of profit from cryptocurrency. Millions of dollars were diverted for their own benefit to purchase cryptocurrency, real estate, luxury cars, expensive jewelry and dozens of trips on private yachts. “Meanwhile, the vast majority of their victims suffered losses — in many cases, losses that had a serious impact on their financial and emotional well-being,” Miller added.
The two Estonian citizens will have their assets worth 450 million dollars confiscated.
It will be used to pay compensation to the victims.
Between 2015 and 2019, Potapenko and Turõgin’s company, Hashflare, entered into contracts that falsely promised customers a share of the profits made from mining cryptocurrency. Both used fake online pages that simulated non-existent activity and profit figures. Total sales reached 577 million dollars. In reality, Hashflare lacked the capacity to mine most of the cryptocurrency the company claimed to have created. Meanwhile, the fraudsters used investor funds to purchase property and vehicles, as well as to pay for their own cryptocurrency investments.
Cryptocurrency mining is the process in which specially equipped computers verify and record transactions on a blockchain network, and cryptocurrency miners receive newly created cryptocurrency as a reward.
Prosecutors had sought a 10-year prison sentence, and the U.S. Department of Justice is still considering an appeal. In turn, the entrepreneurs and their lawyers have claimed that the investors have not suffered any losses.
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