Legal Experts Weigh In: Can Prosecutors Overturn 'Lenient' Sentence in Major Crypto Ponzi Case?

Federal prosecutors are pushing back against what they view as an overly lenient outcome in a sprawling crypto mining fraud that deceived nearly half a million victims globally. The government has filed an appeal with the Ninth Circuit Court of Appeals, challenging Judge Robert S. Lasnik’s decision to impose only supervised release and fines on two Estonian nationals convicted in a $577 million scheme—far short of the 10-year prison terms authorities sought.

The Appeal and the Sentencing Decision

Sergei Potapenko and Ivan Turõgin pleaded guilty in February to orchestrating one of the Western District of Washington’s largest fraud operations. Judge Lasnik sentenced the defendants to time served, three years of supervised release, and $25,000 fines each—a decision prosecutors argue falls short of appropriate punishment for such a massive deception. The government’s notice contests both the sentencing hearing and Lasnik’s written order.

Experts: Appeals Face an Uphill Battle

Legal analysts examining the case suggest prosecutors will encounter significant obstacles in reversing the sentence. Ishita Sharma, blockchain attorney and managing partner at Fathom Legal, explained that appellate courts typically defer to trial judges’ discretionary decisions unless they fall clearly outside reasonableness bounds. “The Ninth Circuit generally looks at whether the judge properly applied sentencing guidelines and maintained consistency with national standards for fraud cases,” Sharma noted, emphasizing that judges must also balance whether leniency undermines deterrence for economic crimes.

Navodaya Singh Rajpurohit from Coinque Consulting agreed, stating that while the outcome appears “unusually lenient” on its surface, Judge Lasnik provided detailed reasoning. The judge specifically addressed time already served, immigration law complications, and restitution considerations—factors the Ninth Circuit would likely scrutinize carefully. “History shows appeals courts rarely overturn when judges tie their decisions to specific, well-reasoned arguments,” Rajpurohit told analysts, suggesting prosecutors’ chances of success remain limited across the region’s judicial system for similar cases.

Why Judge Lasnik Made This Sentencing Decision

The judge articulated his concerns about foreign defendants’ treatment within the American system. He noted that treaty transfer approval for serving sentences in Estonia remained uncertain, and without such transfers, the defendants would face “significantly longer and harsher” imprisonment than comparable American white-collar criminals—potentially followed by indefinite ICE detention before deportation. During 27 years on the federal bench, Lasnik called this “one of the most difficult sentencings” he had encountered, reflecting the genuine systemic tensions the case exposed.

The Scale of the Fraud

From 2015 to 2019, Potapenko and Turõgin victimized 440,000 people worldwide through fraudulent mining contracts. They displayed fake online dashboards with fabricated returns while operating no actual mining infrastructure. Investor funds instead financed luxury purchases and Bitcoin purchases through exchanges to pay early withdrawers—a classic Ponzi structure. The defendants forfeited approximately $400 million in seized assets for victim compensation, marking recovery from what authorities called “the largest fraud ever prosecuted” in this jurisdiction.

Spektor, counsel for Turõgin, expressed confidence that the Ninth Circuit will uphold Lasnik’s decision, praising both the original sentencing and his subsequent written explanation as fair and thorough. The outcome will likely influence how courts balance severity of economic crimes against humanitarian concerns in sentencing determinations moving forward.