US authorities charged 11 people in an alleged international cryptocurrency Ponzi and pyramid scheme that duped millions worldwide into investing more than $300 million on the Forsage platform, the Securities and Exchange Commission announced Monday, marking the latest crypto crash as scrutiny of the industry intensifies .
The SEC alleges that Forsage operated as a traditional Ponzi scheme, sending money to early investors and paying those who convinced others to join.
Forsage recruited users to deposit cryptoassets on the platform to fund automatically executed “smart contracts” to receive a profit, but the SEC alleges that those assets were instead used to deliver profits to individuals higher up the pyramid.
Authorities charged Forsage’s four foreign-based founders, who were last known to live in Georgia, Indonesia and Russia, as well as seven Americans who promoted Forsage who the SEC is seeking to agree to return profits, pay fines and accept conduct provisions.
Forsage continued to operate despite cease-and-desist orders from the SEC of the Philippines in 2020 and Montana’s Commissioner of Securities and Insurance in 2021.
The company brought in over $1.3 billion in lifetime revenue and had 2.1 million users, claimed Forsage’s website, which accepted Binance, Ethereum and Tron crypto tokens.
The SEC has expanded its crypto regulation in recent months, expanding its newly named Crypto Assets and Cyber Unit from 30 to 50 positions in May. Last month, the SEC arrested three people, including a former chief product officer at crypto exchange Coinbase, in its first crypto insider trading case. The cryptocurrency market has cooled considerably this year, with the price of bitcoin cratering over 50% and several firms losing large parts of their workforce.
Carolyn Welshhans, acting head of the SEC’s Crypto Assets and Cyber Unit, called Forsage “a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors” in the release.
Ex-Coinbase Manager, Two Others Indicted in Alleged $1.1 Million Crypto Insider Trading Scheme (Forbes)
Crypto Winter Watch: All the Big Layoffs, Record Withdrawals, and Bankruptcies Triggered by the $2 Trillion Crash (Forbes)