Federal Authorities Erroneously Instruct Estonian HashFlare Fraudsters to Leave the Country Before Sentencing

Just four months ahead of their criminal sentencing for operating a $577 million cryptocurrency mining Ponzi scheme, the two Estonian founders of HashFlare received what appeared to be a mistaken order from the U.S. Department of Homeland Security (DHS) directing them to self-deport. This instruction contradicted a court order requiring that the men remain in Washington state until their sentencing in August.

In a joint letter to District Judge Robert Lasnik of the Western District of Washington last week, the attorneys representing Sergei Potapenko and Ivan Turogin stated that both individuals had received alarming communications from DHS ordering their immediate departure from the country. The email, dated April 11, informed them: “It is time for you to leave the United States. DHS is terminating your parole. Do not attempt to remain in the United States – the federal government will find you. Please depart the United States immediately.”

Included with the letter, the email warned both men of potential “criminal prosecution, civil fines, and penalties and any other lawful options available to the federal government” should they fail to leave the country. Such language is reminiscent of communications often directed toward undocumented immigrants.

Ironically, Potapenko and Turogin are not in the U.S. by choice; they were extradited from Estonia at the request of the U.S. Department of Justice in 2022, facing an 18-count indictment related to their HashFlare operations. Initially pleading not guilty to all charges, they changed their pleas to guilty on one count of conspiracy to commit wire fraud in February, a charge that carries a maximum sentence of 20 years in prison, and agreed to forfeit over $400 million in assets. Since last July, they have been in the Seattle area on bond.

Mark Bini, a partner at Reed Smith LLP and lead counsel for Potapenko, expressed in their joint letter that while both men wish to return home, they acknowledge their obligation to abide by the Court’s order to remain in King County. Bini noted that the DHS’s communications caused both Potapenko and Turogin “significant anxiety.”

“We and our clients have all seen recent news. Immigration authorities make mistakes, and individuals who should not be in custody sometimes end up in custody or even deported to places they should not be,” Bini wrote.

Six days after Bini’s letter to the judge, the DOJ filed a letter with the court indicating that prosecutors had coordinated with DHS’s Homeland Security Investigations (HSI) division, resulting in a year-long deferral to the self-deportation order. “This should provide ample time for the sentencing to take place,” the prosecution’s letter noted.

DHS has not provided a comment regarding the matter. Potapenko and Turogin are scheduled to be sentenced on August 14 in Seattle. Their legal team has indicated plans to request a sentence of time served, hoping for their immediate return to Estonia.