Lawyer hopes Hashflare co-founders can ‘self-deport’ after sentencing
A lawyer representing one of the co-founders of crypto mining service Hashflare has addressed how their criminal case may move forward after the pair received “self-deport” letters from the US Department of Homeland Security (DHS).
In an April 11 filing in the US District Court for the Western District of Washington, Hashflare co-founders Sergei Potapenko and Ivan Turogin reported they had received a DHS letter directing them to “leave the United States” as part of a push by the Trump administration to effect mass deportations. The government letter contradicted orders from Judge Robert Lasnik, who restricted travel for Potapenko and Turogin as part of their bail conditions.
In February, the Estonian nationals pleaded guilty to conspiracy to commit wire fraud as part of a deal with authorities. Between 2015 and 2019, the two were responsible for defrauding Hashflare users out of more than $550 million. They also raised $25 million from investors in 2017, claiming they would establish a digital bank called Polybius. The firm was never created.
Indicted in October 2022, Potapenko and Turogin were arrested and held in Estonia before their extradition to the US in May 2024. Both have been free on bail since July 2024 but could face up to 20 years in prison each at sentencing.
Ordered to leave, forced to stay
“[Potapenko and Turogin each] got letters from DHS to their personal email saying ‘deport immediately,’” Reed Smith partner and defense counsel Mark Bini told Cointelegraph. “It caused some angst because [our client and his co-defendant], their conditions of release include that they comply with the law. And here you have this letter saying if you stay in the country, you’re breaking the law. And of course, their bail conditions say they can’t leave the Seattle area.”
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The DHS letters ordering certain people to “depart the United States immediately” were reportedly sent to thousands of immigrants who had used the government’s CBP One app to enter the country legally. However, some citizens reported receiving the same letter in US President Donald Trump’s attempts to effect deportations through his office.
Bini initially thought it was a possibility that the US government was suggesting that Potapenko or Turogin “self-deport” to Estonia after the Justice Department issued a memo hinting it would change its enforcement policy in criminal cases involving crypto. The Hashflare co-founders had been expected to remain in the jurisdiction until at least Aug. 14 for their sentencing hearings.
“I have not encountered this situation before, where you have essentially two folks in the federal government telling you conflicting things,” said Bini.
The attorney added that Potapenko or Turogin now carried letters with them at all times that stated DHS had deferred action on their “self-deportation” for one year in the event that authorities mistakenly tried to detain them and remove them from the country. Though the pair could still receive prison time, Potapenko, Turogin and Hashflare reported returning $400 million in crypto payments to users and “agreed to forfeit their interests in assets that the government froze in 2022.”
“We’re going to try and convince the judge to frankly side with DHS and let them self-deport to Estonia to their families because we believe that there was no actual financial harm to the customers of Hashflare,” said Bini. “It’s a weird [case] because for our clients, we want to be deported. Our clients are Estonian. Their families are Estonian.”
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The US Federal Deposit Insurance Corporation will propose a framework for implementing US stablecoin laws later this month, according to its acting chair, Travis Hill.
“The FDIC has begun work to promulgate rules to implement the GENIUS Act; we expect to issue a proposed rule to establish our application framework later this month,” Hill said in prepared testimony to be delivered on Tuesday to the House Financial Services Committee.
He added the agency will also have a “proposed rule to implement the GENIUS Act’s prudential requirements for FDIC-supervised payment stablecoin issuers early next year.”
President Donald Trump signed the GENIUS Act in July, which created oversight and licensing regimes for multiple regulators, with the FDIC to police the stablecoin-issuing subsidiaries of the institutions it oversees.
The FDIC insures deposits in thousands of banks in the event that they fail, and under the GENIUS Act, it will also be tasked with making “capital requirements, liquidity standards, and reserve asset diversification standards” for stablecoin issuers, said Hill.
Federal agencies, such as the FDIC, publish their proposed rules for public feedback, and they then review and respond to the input, if necessary, before publishing a final version of the rules, a process that can take several months.
Related: Republicans urge action on market structure bill over debanking claims
The Treasury, which will also regulate some stablecoin issuers, including non-banks, began its implementation of the GENIUS Act in August and finished a second period of public comment on its implementation proposal last month.
FDIC is working on tokenized deposit guidelines
Hill said in his remarks that the FDIC has also considered recommendations published in July by the President’s Working Group on Digital Asset Markets.
“The report recommends clarifying or expanding permissible activities in which banks may engage, including the tokenization of assets and liabilities,” Hill said.
“We are also currently developing guidance to provide additional clarity with respect to the regulatory status of tokenized deposits,” he added.
Fed helping regulators with stablecoin rules
The Federal Reserve’s vice supervision chair, Michelle Bowman, will also testify on Tuesday that the central bank is “currently working with the other banking regulators to develop capital, liquidity, and diversification regulations for stablecoin issuers as required by the GENIUS Act.”
Bowman added, according to her prepared remarks, that “we also need to provide clarity in treatment on digital assets to ensure that the banking system is well placed to support digital asset activities.”
“This includes clarity on the permissibility of activities, but also a willingness to provide regulatory feedback on proposed new use cases,” she said.
The House Finance Committee’s hearing on Tuesday will also see remarks from the heads of the Office of the Comptroller of the Currency and the National Credit Union Administration, which will both have a role in implementing stablecoin rules.
Magazine: Bitcoin vs stablecoins showdown looms as GENIUS Act nears
The Japanese government is reportedly backing plans to introduce a significant reduction in the nation’s maximum tax rate on crypto profits, with a flat rate of 20% across the board.
Japan’s financial regulator, the Financial Services Agency (FSA), first floated the proposed tax changes in mid-November, outlining plans to introduce a bill in early 2026, and now the government and ruling coalition — the political parties in control of Japan’s parliament, the National Diet — are on board.
According to a report from Japanese news outlet Nikkei Asia on Sunday, the new rules aim to align crypto taxation rules with those of other financial products, such as equities and investment funds.
Under the current laws, taxation on crypto trading is included as part of income taxes for individuals and businesses, falling under the category of “miscellaneous income.” The rate ranges from 5% on the lower end of the spectrum to 45% on the high end, with high-income earners potentially on the hook for an additional 10% inhabitant tax.
Meanwhile, assets such as equities and investment trusts are taxed separately, with a flat 20% tax on profits, regardless of the amount.
The tax changes could be a boon for the domestic cryptocurrency market, as the higher tax rates may have deterred potential investors.
According to the Nikkei report, the potential changes to crypto taxation in Japan will be introduced as part of a “solid investor-protection framework” proposed in the FSA’s bill, which aims to amend the Financial Instruments and Exchange Act.
The FSA will submit the bill during the regular Diet session in 2026, as it pushes for greater oversight of crypto trading, including a ban on dealing with non-public information and stricter investment disclosures.
Japan finally set for crypto tax change after long fight
The Japan Blockchain Association (JBA), the nation’s major crypto-focused non-governmental lobbying group, has been calling for these changes for almost three years.
Related: Bitcoin falls to $84K: Is Japan’s bond market the culprit, or is more at play?
In July 2023, the JBA published a letter to the government on its website, outlining key tax reform requests to support the industry. The letter called for a 20% tax rate that aligns with other investment vehicles.
“This letter requests a review of tax on crypto assets, which is the biggest hurdle for companies operating Web3 businesses in Japan and a disincentive for the public to actively own and use crypto assets,” the letter reads.
While it is unclear if the JBA had a direct influence on the FSA’s thinking, the financial watchdog did start warming up to the idea and pushing for reform in September 2024.
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Sir Keir Starmer has warned China poses “real national security threats to the United Kingdom”.
But the prime minister also described China as a “nation of immense scale, ambition and ingenuity” and a “defining force in technology, trade and global governance”.
“The UK needs a China policy that recognises this reality,” he added in a speech at the Guildhall in London.
“Instead, for years we have blown hot and cold.
“So our response will not be driven by fear, nor softened by illusion. It will be grounded in strength, clarity and sober realism.”
Prime Minister Keir Starmer giving his speech. Pic: Reuters
Describing the absence of engagement with China – the world’s second-biggest economy – as “staggering” and “a dereliction of duty”, Sir Keir said: “This is not a question of balancing economic and security considerations. We don’t trade off security in one area, for a bit more economic access somewhere else.
“Protecting our security is non-negotiable – our first duty. But by taking tough steps to keep us secure, we enable ourselves to cooperate in other areas.”
Sir Keir’s remarks come after MPs and parliamentarians were warned last month of new attempts to spy on them by China.
And they follow the collapse of a prosecution of two people suspected of spying on behalf of China.
That case led to controversy over how the government under Labour responded to the Crown Prosecution Service’s requests for evidence.
Speech at the annual Lady Mayor’s Banquet. Pic: Reuters
At the time, Sir Keir sought to blame the previous Conservative government for the issues, which centred on whether China could be designated an “enemy” under First World War-era legislation.
Meanwhile, Sky News understands the prime minister is set to approve plans for a controversial Chinese “super embassy” in central London.
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A final decision on the planning application for the former Royal Mint site near the Tower of London is due on 10 December, after numerous previous delays.
Sir Keir is also understood to be preparing for a likely visit to China in the new year.
Since he was elected last year, Sir Keir has been active on the world stage, trumpeting deals with the US, India and the EU and leading the “coalition of the willing” in support of Ukraine.
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PM preparing for likely China visit
But he has also faced criticism from his opponents, who accuse him of spending too much time out of the UK attending international summits rather than focusing on domestic issues.
Sir Keir offered a defence of his approach, describing it as “the biggest shift in British foreign policy since Brexit” and “a decisive move to face outward again”.
While saying he would “always respect” the Brexit vote as a “fair, democratic expression”, he said the way the UK’s departure from the EU had been “sold and delivered” was “simply wrong”.
He said: “Wild promises were made to the British people and not fulfilled. We are still dealing with the consequences today.”
In his speech on Monday, the prime minister accused opposition politicians of offering a “corrosive, inward-looking attitude” on international affairs.
Sir Keir Starmer. Pic: Reuters
Taking aim at those who advocate leaving the European Convention on Human Rights or NATO, he said they offered “grievance rather than hope” and “a declinist vision of a lesser Britain”.
Sir Keir said: “Moreover, it is a fatal misreading of the moment, ducking the fundamental challenge posed by a chaotic world – a world which is more dangerous and unstable than at any point for a generation, where international events reach directly into our lives, whether we like it or not.”
He added: “In these times, we deliver for Britain by looking outward with renewed purpose and pride, not by shrinking back. In these times, internationalism is patriotism.”
Responding to the prime minister’s speech, shadow foreign secretary Dame Priti Patel said: “From China’s continued flouting of economic rules to transnational repression of Hong Kongers in Britain, Starmer’s ‘reset’ with Beijing is a naive one-way street, which puts Britain at risk while Beijing gets everything it wants.
“Starmer continues to kowtow to China and is captivated by half-baked promises of trade.
“Coming just days after the latest Chinese plot to interfere in our democracy was exposed, his love letter to the Chinese Communist Party is a desperate ploy to generate economic growth following his budget of lies and is completely ill-judged.
“While China poses a clear threat to Britain, China continues to back Iran and Russia, and plots to undermine our institutions. Keir Starmer has become Beijing’s useful idiot in Britain.”
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