Ivan Turogin and Sergei Potapenko, the co-founders of inactive Bitcoin cloud miner HashFlare, are again slated for extradition from Estonia to the United States. The Estonian citizens’ extradition was halted by an appeals court in November, but the Estonian government has since met the necessary conditions for its continuation.
Turogin and Potapenko have been charged with 18 counts of conspiracy, wire fraud, and conspiracy to commit money laundering in the United States and face up to 20 years each in prison. Their company was once a leading cloud miner but was allegedly run as a Ponzi scheme.
Turogin and Potapenko were arrested in Estonia in November 2022, after a large-scale investigation involving U.S. and Estonian law enforcement.
The Estonian government approved the extradition of Turogin and Potapenko in September, but they successfully appealed the decision in November, and a court ruled that the lower court that approved their extradition failed to consider the conditions in U.S. detention facilities. The higher court ordered that Turogin and Potapenko should receive monetary compensation instead.
Now, the Estonian government has collected evidence on U.S. detention conditions indicating that it could “ensure that the infringement of the individuals' fundamental rights due to extradition is not disproportionate,” according to local news publication Postimees.
HashFlare took in $575 million before collapsing in 2019. It had been experiencing problems since the previous year, when it shut down some of its miners claiming lack of revenue from them.
The U.S. Department of Justice (DOJ) claimed Turogin and Potpenko “offered contracts under which customers could pay a fee to rent a percentage of HashFlare’s mining operations in exchange for the virtual currency produced by their portion of the operation.” HashFlare did not have the equipment it claimed, or even 1% of the computing power they said they did, however. The DOJ continued:
“When investors asked to withdraw their mining proceeds […] the defendants either resisted making the payments, or paid off the investors using virtual currency the defendants had purchased on the open market — not currency they had mined.”
The DOJ claimed the scam has “hundreds of thousands” of victims. The U.S. Federal Bureau of Investigation is still looking for victims.
Turogin and Potapenko are also accused of collecting $25 million from investors to establish a digital bank that would be called Polybius. They did not follow through on their plans.