What it was
HashFlare sold cloud mining contracts. A customer paid for a share of hash rate and was promised a share of the cryptocurrency, bitcoin included, that the hash rate produced. A web dashboard showed the customer their accruing mining proceeds. The Department of Justice records that between 2015 and 2019 HashFlare's sales totalled more than $577 million.
The Bitcoin connection is real and is the whole mechanism: the product was a claim on mining output, and the pitch worked because mining is opaque to almost everyone who buys exposure to it.
On the record
The Department of Justice states that HashFlare did not possess the computing capacity to perform the vast majority of the mining it told customers it was performing, and that the dashboard reflected falsified data. When customers asked to withdraw, the operators either resisted paying or paid them with cryptocurrency bought on the open market rather than mined. The same defendants separately raised at least $25 million for a purported virtual-currency bank called Polybius, which never became a bank and never paid a dividend.
A grand jury in the Western District of Washington returned an 18-count indictment on 27 October 2022. Sergei Potapenko and Ivan Turõgin were arrested in Tallinn in November 2022 and later extradited.
On 12 February 2025 each pleaded guilty to one count of conspiracy to commit wire fraud, agreeing to forfeit assets worth more than $400 million at the date of the plea.
On 12 August 2025 US District Judge Robert S. Lasnik sentenced each of them to 16 months in prison, which they had already served in custody, plus a $25,000 fine and 360 hours of community service during supervised release. The sentences incorporated forfeiture of cryptocurrency, funds, vehicles, real property and mining equipment collectively valued at over $450 million, held for a victim remission process. The announcement records that prosecutors had argued for a ten-year term and that the Department of Justice was considering an appeal of the sentence. Listing here is not endorsement.