Feds quick to appeal “time served” sentence for foreign nationals involved in massive fraud with 30-year-to-life guideline range
This press piece, headlined “US Prosecutors Challenge ‘Unusually Lenient’ Sentence in HashFlare Mining Fraud,” reports that federal prosecutors were quick to appeal this notable federal sentencing decision in a cryptocurrency fraud handed down this week. Here is a bit of the story from the press piece:
Federal prosecutors have moved to overturn what one legal expert called an “unusually lenient” outcome in one of the largest crypto frauds ever tried in the region. The government on Tuesday appealed with the Ninth Circuit Court of Appeals the “time served” sentences handed down to Estonian nationals Sergei Potapenko and Ivan Turõgin, who pleaded guilty to conspiracy in a $577 million cryptocurrency mining Ponzi scheme….
The appeal targets [Judge Robert S.] Lasnik’s decision to sentence Potapenko and Turõgin to only three years of supervised release and $25,000 fines each, rejecting prosecutors’ request for 10-year prison terms in what authorities called “the largest fraud ever prosecuted” in the Western District of Washington….
Navodaya Singh Rajpurohit, legal partner at Coinque Consulting [said] that while the sentence may seem “unusually lenient,” Judge Lasnik clearly articulated his reasoning around “time already served, immigration risks, and restitution concerns.”…
The HashFlare defendants pleaded guilty in February to defrauding 440,000 victims worldwide through fraudulent crypto mining contracts from 2015 to 2019. They showed customers “fake online dashboards” with fictitious returns while lacking the mining infrastructure they promised, instead using investor funds for luxury purchases and buying Bitcoin through exchanges to pay early withdrawers.
Judge Lasnik has described the case as “one of the most difficult sentencings the Court has encountered during 27 years on the federal bench.” He noted that all parties agreed the defendants should serve any prison sentence in Estonia through a treaty transfer, but is “taking too great a risk by assuming that office [Department of Justice’s Office of International Affairs] will approve defendants’ treaty transfer rather than reject it,”
Lasnik warned that without treaty transfers, the defendants would “face a significantly longer and harsher term of imprisonment” than American white-collar criminals receiving identical sentences, followed by “indefinite detention” by Immigration and Customs Enforcement before deportation.
This press overview highlights only some of the issue that the sentencing judge had to sort through, including calculation of the guideline range. Notably, though federal prosecutors were arguing for “only” a 10-year sentence, the calculated guideline range was 360 months to life (which was higher than the applicable statutory maximum). I recommend the full 14-page sentencing opinion, and here is how it concludes:
The foregoing shows that this case presents certain unique circumstances. Taking the totality of those circumstances into account, the Court finds mitigating circumstances here that justify a major downward departure from the statutory maximum of 240 months (and from the ten-year sentence sought by the Government, which itself was a major downward departure from the both the Guidelines range of 360 months to life and the statutory maximum of 240 months).
The seriousness of this crime is indisputable, but having considered the § 3553 factors the Court, under these unique circumstances, will accept the defense recommendation and impose a sentence of credit for time served. The Court will also impose three years of supervised release, which can be done remotely, as well as a special assessment of $100 and a fine of $25,000 for each defendant. In addition, each defendant shall perform 120 hours of community service per year of supervision in their neighborhoods in Estonia and provide verification to the probation office. Defendants shall have their passports returned to them upon release.
The Court agrees with the Government that it is important to send a message with this sentence, and the message the Court intends to send to fraudsters is this: “You will be punished, and the punishment will vary depending on the totality of the circumstances.”