Prosecutors Seek Ninth Circuit Review of HashFlare Time-Served Sentence, Citing $577M Ponzi and ETH Gains

• Appeal filed to Ninth Circuit seeking 10‑year terms

• Founders pleaded guilty to conspiracy to commit wire fraud after extradition from Estonia.

• Prosecutors cite $577 million in sales and alleged fabricated dashboards as evidence of a classic Ponzi structure.

HashFlare sentence appeal: US prosecutors ask Ninth Circuit for 10-year terms after alleged $577M Ponzi; read case details and what comes next. (150-160 characters)

What is the HashFlare sentence appeal?

The HashFlare sentence appeal is the Department of Justice’s challenge to a Seattle federal court’s decision that sentenced co‑founders Sergei Potapenko and Ivan Turõgin to time served. Prosecutors told the Ninth Circuit the government seeks 10‑year prison terms, citing extensive investor harm tied to an alleged $577 million Ponzi scheme.

How did prosecutors describe the alleged scheme?

Prosecutors say HashFlare sold mining contracts from 2015–2019 totaling over $577 million and presented fake dashboards inflating mining capacity and returns. They contend existing customers were paid with funds from newer investors, which they classify as a classic Ponzi method.

Prosecutors lodged an appeal against the sentence of the co-founders of mining service HashFlare. Source: PACER

Why did the district court impose time served?

The Seattle court, presided by Judge Robert Lasnik, sentenced both defendants on Aug. 12 to time served, imposed a $25,000 fine, and ordered 360 hours of community service during supervised release expected in Estonia. Defense counsel argued victims received crypto worth more than initial investments and that forfeited assets would cover restitution.

How strong is the government’s case on appeal?

Front‑loaded facts: the government emphasizes the $577 million sales figure, alleged fabricated data, and the classic Ponzi payout structure. The appeal will hinge on whether the Ninth Circuit finds the district court’s sentencing rationale legally sufficient given the record and sentencing guidelines.

What evidence and expert commentary have surfaced?

Prosecutors relied on transactional totals, internal dashboards, and plea agreements that included forfeiture of more than $400 million in assets. Blockchain investigators such as ZachXBT and Taylor Monahan have publicly warned that perceived lenient outcomes reduce deterrence for crypto frauds (reported in public media sources).

When will the Ninth Circuit rule?

The Ninth Circuit timeline varies: after the notice of appeal and record transmission, briefing typically takes weeks to months, followed by possible oral argument and a decision. The court can affirm, vacate, or remand for re‑sentencing based on legal review.

Have other Ponzi operators received prison time?

Yes. Recent U.S. cases include a two‑and‑a‑half year sentence for Shane Donovan Moore (crypto mining Ponzi) and an eight‑year sentence for Dwayne Golden in a $40 million scheme involving multiple firms. These cases show sentencing across a range of terms for comparable frauds.

Frequently Asked Questions

How did Potapenko and Turõgin end up in U.S. custody?

They were arrested in Estonia in October 2022, held for 16 months, and extradited to the U.S. in May 2024. Both pleaded guilty to conspiracy to commit wire fraud following extradition.

Will victims be repaid from forfeited assets?

Defense attorneys state over $400 million in assets were forfeited and could repay victims. Prosecutors dispute some data accuracy. Restitution logistics depend on court‑supervised distribution and asset realization.

What penalties can the Ninth Circuit impose?

The Ninth Circuit can affirm the original sentence, vacate the sentence and remand for re‑sentencing, or, in limited circumstances, order a different sentence if legal error is found in the district court’s process.

Key Takeaways

• Appeal filed: US prosecutors appealed the time‑served sentence to the Ninth Circuit seeking 10 years.
• Alleged scale: Authorities say HashFlare collected over $577 million and used new customer funds to pay earlier investors.
• Outcome uncertainty: The Ninth Circuit may affirm, remand, or order re‑sentencing; restitution depends on asset forfeiture and distribution processes.

Conclusion

The HashFlare sentence appeal places a high‑profile alleged $577 million crypto Ponzi back before appellate review, testing how courts weigh investor harm and sentencing in digital asset frauds. COINOTAG will monitor Ninth Circuit filings and any restitution developments as the case proceeds.