HashFlare: The Story Behind the Infamous Crypto Ponzi Scheme

HashFlare was promoted as a licensed cloud mining service offering lifetime mining power rentals for users who couldn't or didn't want to buy their own equipment. Founders Sergei Potapenko and Ivan Turogin aggressively marketed the platform, showcasing videos from mining centers and even inviting clients to tour operational facilities. They emphasized that their company was officially registered in Estonia, which helped gain users' trust.

The platform seemed completely reliable: a professional website, quick support, official European registration, and impressive videos from data centers. The returns were reasonable, and withdrawals were processed without delay—nothing seemed off. Thankfully, I withdrew all my assets before the platform scammed people,

shared one HashFlare user exclusively with us.

While the developers did have some mining power and were involved in actual mining, they simultaneously ran a classic Ponzi scheme. Payouts to early investors were funded by new participants' contributions, as the company lacked the promised mining capacity to sustain the returns they advertised. Additionally, they falsified data on the platform to create the illusion of profits, and occasionally disabled the ability to purchase mining power, creating a false sense of scarcity or urgent updates to avoid suspicion.

The Launch of Polybius

Before any doubts emerged about HashFlare, the developers launched a new project, a digital bank called Polybius. They marketed it as an initiative from the “trusted” creators of the popular cloud mining platform. As a result, Polybius quickly became associated with HashFlare. To attract investments, the developers held an Initial Coin Offering (ICO), raising about $31 million with promises of innovative cryptocurrency banking services. They aggressively promoted the project on social media and even created a real website where users could explore the future crypto bank.

Although it sounds laughable now, the idea behind Polybius seemed truly groundbreaking at the time. There were no crypto cards, and exchanges didn’t inspire much trust (except, maybe, Binance). I invested a small amount during the ICO but later decided to pull my funds out. Looking back, I’m amazed I managed to do so,

shared one of the Polybius ICO participants exclusively with us.

A few months later, as users began asking for updates on the project’s development, the creators started making excuses. By 2018-2019, they had disappeared entirely.

It later emerged that during this time, they had been using a portion of the funds for personal expenses—buying real estate, luxury cars, and high-end goods, as well as investing in cryptocurrency. To conceal their fraudulent activities, they funneled money through shell companies and moved funds between multiple crypto wallets. Despite these efforts, they were arrested in 2022 during an international operation and later extradited to the United States, where the HashFlare founders pleaded guilty to conspiracy to commit wire fraud.

Arrest, Asset Seizure, and Trial

After their arrest and plea agreement, prosecutors seized $400 million in assets. The defendants agreed to forfeit any claims to digital holdings and cooperate with law enforcement to help recover stolen funds for users and major investors. 

Defense attorneys stated that most affected users had already received their initial investments before the platform shut down. However, after the plea deal was signed, this fact no longer seemed significant.

Between 2015 and 2019, HashFlare’s sales totaled more than $577 million, but HashFlare did not possess the requisite computing capacity to perform the vast majority of the mining,

the U.S. Department of Justice stated.

The Federal Bureau of Investigation (FBI) has called on affected investors to provide testimony and has even launched a dedicated website where users can report stolen funds. Both defendants face up to 20 years in prison, with sentencing set for May 8, 2025. Any additional evidence submitted before then could potentially impact the final verdict.

Related: Crypto Scam — Fake Mining Platform Targets 200 Users