The US Securities Exchange Commission(SEC) has slapped charges against 11 individuals including founders, promoters of alleged ‘crypto pyramid scheme’ Forsage.
The allegations were raised by the SEC in a U.S District Court in Illinois on August 1. The SEC argued that the founders and promoters of the platform used the “fraudulent crypto pyramid and Ponzi scheme” to accumulate over $300 million from “millions of retail investors” globally.
The official complaint read that Forsage did not sell or claim to sell any actual, ‘consumable’ product to legitimate retail customers during the relevant time period and ‘had no apparent source of revenue other than funds received from investors’.
The most fundamental way for investors to earn money from Forsage was by recruiting others into the scheme.
The SEC complaint further said that Forsage was developed such that investors would be monetarily rewarded by hiring new investors to the platform in a “typical Ponzi structure,” which stretched across several countries like the United States and Russia.
As per the SEC, Forsage’s alleged Ponzi scheme was implemented by firstly asking new investors to set up a crypto-asset wallet and leading them to buy “slots” from Forsage’s smart contracts.
The slots give users’ the right to earn remuneration from others whom they onboarded into the scheme, referred to as “downlines”. Remunerations were also earned from Forsage investors in the form of profit sharing, called “spillovers”.
Carolyn Welshhans, a SEC official called Forsage a “fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors.”
Welshhans further added that scammers cannot sidestep the federal securities laws by focusing their schemes on smart contracts and blockchains.
The SEC’s complaint named four founders including Vladimir Okhotnikov, Jane Doe aka Lola Ferrari, Mikail Sergeev, and Sergey Maslakov. The complaint also named seven other promoters, out of which three were in the U.S.-based promotional group called the “Crypto Crusaders”.
The foreign-based founders were last reported to live in Georgia, Indonesia and Russia. As for the seven Americans who promoted Forsage, the SEC plans to ask them to agree to return profits, pay fines and accept behavior provisions.
The accused have been charged with “Unregistered Offers and Sales of Securities” under Section 5 A & C and “Fraud” under Section 17(a) (1 & 3) of the US Securities Act. All 11 accused have also been charged with “Fraud” under Section 10 B-C of the US Exchange Act.
Welshhans elaborated that the accused had carried out the Ponzi conspiracy to such a massive extent that retail investors were coaxed into buying the model over the last two years.
Scandals are nothing new for Forsage! As previously too, the firm had received cease and desist letters back in September 2020 and March 2021.