SEC charges 11 people in alleged $300 million crypto Ponzi scheme

SEC charges 11 people in alleged 0 million crypto Ponzi scheme
SEC charges 11 people in alleged 0 million crypto Ponzi scheme

A flag outside the US Securities and Exchange Commission headquarters in Washington, DC, US, Wednesday, February 23, 2022.

Al Drago | Bloomberg | Getty Images

On Monday, the Securities and Exchange Commission said it charged 11 people for their roles in creating and promoting an allegedly fraudulent crypto pyramid and Ponzi scheme that raked in more than $300 million from millions of retail investors worldwide, including in the United States.

The scheme, called Forsage, claimed to be a decentralized smart contract platform, and it allowed millions of retail investors to transact via smart contracts that operated on the ethereum, tron ​​and binance blockchains. But under the hood, the SEC alleges that for more than two years the setup operated as a standard pyramid scheme, with investors making profits by recruiting others into the operation.

In a statement, the SEC added that Forsage operated a typical Ponzi structure, where it allegedly used assets from new investors to pay earlier.

“As the complaint alleges, Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors,” wrote Carolyn Welshhans, acting head of the SEC’s Crypto Assets and Cyber ​​Unit.

“Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.”

Forsage, through its support platform, declined to provide a method to contact the company and did not provide comment.

Four of the eleven people charged by the SEC are the founders of Forsage. Their current whereabouts are unknown, but they were last known to live in Russia, the Republic of Georgia and Indonesia.

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The SEC has also charged three US-based promoters who endorsed Forsage on their social media platforms. They were not named in the SEC release.

Forsage launched in January 2020, and regulators around the world had tried a couple of different times to shut it down since then. Cease-and-desist suits were filed against Forsage first in September 2020 by the Securities and Exchange Commission of the Philippines, and later, in March 2021, by the Montana Commissioner of Securities and Insurance. Despite this, the defendants allegedly continued to promote the scheme while denying the allegations in several YouTube videos and in other ways.

Two of the defendants, both of whom neither admitted nor denied the charges, agreed to settle the charges, subject to court approval.

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