Estonian Government Approves Extradition of HashFlare Founders to US, Overrules Court Block
In Brief
Estonia approved the extradition of former HashFlare founders to the US, which allegedly operated as a Ponzi scheme swindling $575 million.
Estonian government approved the extradition to the United States of two Estonian cryptocurrency entrepreneurs and founders of the defunct cloud cryptocurrency mining service HashFlare, which allegedly operated as a Ponzi scheme resulting in the misappropriation of $575 million.
Estonia’s Ministry of Justice, following a thorough review, has concluded that there is adequate evidence, ensuring that the extradition process does not disproportionately violate the fundamental rights of the individuals. Nevertheless, the precise timeline for the extradition of former HashFlare founders Sergei Potapenko and Ivan Turõgin to the United States to address fraud charges remains uncertain.
This decision is a response to the Tallinn Circuit Court’s intervention in November 2023, during which it voiced criticism toward the Estonian government. The court contended that there was a lack of a comprehensive investigation into crucial aspects of the extradition decision concerning the founders. The United States authorities have leveled accusations against the duo, alleging the laundering of $575 million in clients’ funds for the acquisition of real estate and luxury cars.
Sergei Potapenko and Ivan Turõgin were arrested in Estonia in November 2022 after the United States Department of Justice (DoJ) submitted a written request for their extradition. The indictment alleges that the duo is accused of misleading victims into acquiring deceptive equipment rental contracts through the cryptocurrency mining service HashFlare and investing in a cryptocurrency bank named Polybius Bank.
Prosecutors assert that both enterprises—HashFlare and Polybius Bank—were involved in operating a Ponzi scheme. According to the DoJ, Sergei Potapenko and Ivan Turõgin allegedly utilized shell companies in the process of laundering money of clients’ funds.
Once a Cryptocurrency Mining Giant, HashFlare Faces Fraud Allegations
Founded in 2015, HashFlare offered cloud mining services for Bitcoin, Litecoin, Ethereum, Zcash and Dash. The platform featured a dashboard allowing users to track their mining activity and allocate hash power to different mining pools. Maintenance fees were charged for the mining services.
The company was considered a prominent player in the industry at the time. However, in 2018, numerous users reported encountering challenges or delays in cryptocurrency withdrawals. Following these issues, HashFlare announced the shutting down of its Bitcoin mining services, citing the lack of profitability in Bitcoin mining as the primary reason.
Customers did not receive reimbursements for the remaining fees of their annually paid contracts that were paid upfront. However, other cryptocurrencies in the platform’s portfolio continued to function without disruption.
According to the indictment, the duo asserted that HashFlare operated as a “massive cryptomining operation.” However, allegations suggest that the company was mining at a rate significantly lower than the claimed figure, amounting to less than 1%. Furthermore, it is alleged that withdrawals were funded not from gains derived from mining operations but by purchasing Bitcoin from third parties.
The approval of the extradition for Sergei Potapenko and Ivan Turõgin, along with the ongoing legal proceedings, sheds light on the alleged misconduct of HashFlare’s founders, revealing a complex web of fraud conspiracy involving a Ponzi scheme, financial improprieties, and the misleading representation of their cryptocurrency mining operations.
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Alisa is a reporter for the Metaverse Post. She focuses on investments, AI, metaverse, and everything related to Web3. Alisa has a degree in Business of Art and expertise in Art & Tech. She has developed her passion for journalism through writing for VCs, notable crypto projects, and scientific writing. You can contact her at alisa@mpost.io
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Alisa is a reporter for the Metaverse Post. She focuses on investments, AI, metaverse, and everything related to Web3. Alisa has a degree in Business of Art and expertise in Art & Tech. She has developed her passion for journalism through writing for VCs, notable crypto projects, and scientific writing. You can contact her at alisa@mpost.io
