U.S. Department of Homeland Security Directs HashFlare Founders to Depart Despite Judicial Stay Order
In a notable enforcement action, the U.S. Department of Homeland Security (DHS) has mandated the expulsion of HashFlare’s co-founders, countering a prior court ruling that permitted their temporary stay. The directive underscores the escalating legal complexities surrounding cryptocurrency operations and regulatory compliance. Industry analysts highlight the case as a pivotal example of jurisdictional conflicts between judicial and executive branches in matters of digital asset governance. The founders, whose cloud mining service once dominated the sector, now face heightened scrutiny amid broader crackdowns on non-compliant crypto enterprises.
DHS orders two Ponzi scheme suspects to leave the U.S. immediately
Potapenko and Turõgin claimed that they were both ordered through emails received on April 6 from the DHS to leave the U.S. despite the directive directly contradicting an earlier court order requiring them to remain in King County, Washington. The messages warned they would be subject to potential law enforcement actions, including potential criminal prosecution, civil fines, and penalties.
In a letter addressed to U.S. District Judge Robert Lasnik, their lawyers disclosed that Turõgin received a second message with the same language on April 11, although the prosecution team in their case is currently working with DHS to resolve the issue by applying to DHS to extend their parole in the United States. The letter, in part, read, “although there is nothing Ivan and Sergei would want more than to immediately go home, they understood that they were also under Court order to remain in King County.”
Their lawyers also highlighted the disturbing nature of the communications, pointing out that recent news about wrongful deportations added to their clients’ fear, likely referring to a previous case where mistakenly deported Kilmar Armando Abrego Garcia was sent to serve jail time in El Salvador.
“Immigration authorities make mistakes, and individuals who should not be in custody end up in custody, sometimes even deported to places where they should not be deported.”
-Potapenko and Turõgin attorneys
The defendants were arrested in Tallinn in November 2022 and extradited from Estonia in May 2024. They have since remained in King County, Washington, under bond conditions set by the court.
Hashflare duo plead guilty to conspiracy to commit wire fraud
In February this year, Potapenko and Turõgin pleaded guilty to conspiracy to commit wire fraud for falsely marketing cloud-based crypto mining contracts through their company HashFlare, which operated from 2015 to 2019. The defendants lacked the necessary computing power to conduct the crypto mining they promised and instead used falsified data on their platform to create the illusion of success.
The two defendants also admitted to a second scheme involving a 2017 ICO for a digital bank project, Polybius, which raised $31 million. The FBI said Turõgin and Potapenko used much of the proceeds for their own personal benefit instead of creating a digital bank. The U.S. Attorney’s Office alleged that the defendants laundered the fraud proceeds through at least 75 properties, six luxury vehicles, crypto wallets, and thousands of crypto mining machines.
The duo agreed to forfeit nearly $400 million of fraudulently acquired assets as part of the plea deal. Their lawyers also indicated in their letter that they would request a hearing requiring agency counsel to appear if the DHS issue was not resolved.
Sentencing is scheduled for May 8, and the pair face up to 20 years in prison.
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