Hashflare Defendants Can Be Extradited, Confirms Estonian Government

Ivan Turogin and Sergei Potapenko, the co-founders of HashFlare, a Bitcoin cloud mining company, are facing extradition from Estonia to the United States. The Estonian government has met the necessary conditions for their extradition, after it was initially halted by an appeals court in November. Turogin and Potapenko have been charged with multiple offenses, including conspiracy, wire fraud, and conspiracy to commit money laundering. If convicted, they could each face up to 20 years in prison.

HashFlare was once a prominent cloud mining company but is alleged to have operated as a Ponzi scheme. Turogin and Potapenko were arrested in Estonia in November 2022 following a joint investigation by U.S. and Estonian law enforcement agencies. While the Estonian government initially approved their extradition in September, the decision was successfully appealed in November. The higher court ruled that the lower court had failed to consider the conditions in U.S. detention facilities and instead ordered that Turogin and Potapenko should receive monetary compensation.

The Estonian government has now collected evidence regarding the U.S. detention conditions, which suggests that the infringement of the individuals’ fundamental rights due to extradition would not be disproportionate. This new information has paved the way for the continuation of their extradition. Local news publication Postimees reported on this development.

HashFlare was once a lucrative venture, having taken in $575 million before its collapse in 2019. The company had already encountered difficulties in the previous year, with the shutdown of some of its miners due to lack of revenue. The U.S. Department of Justice (DOJ) alleges that Turogin and Potapenko offered contracts to customers, who would pay a fee to rent a percentage of HashFlare’s mining operations in exchange for virtual currency. The DOJ claims that HashFlare did not possess the claimed equipment or even 1% of the computing power they advertised.

When customers requested to withdraw their mining proceeds, the defendants either resisted making the payments or used virtual currency purchased on the open market instead of the currency they had supposedly mined. The DOJ estimates that the scam affected “hundreds of thousands” of victims, and the U.S. Federal Bureau of Investigation is still searching for additional victims. Turogin and Potapenko are accused of collecting $25 million from investors for the establishment of a digital bank called Polybius, which they never followed through on.