SEC Accuses 11 People of Alleged $300 Million Crypto Ponzi Scheme

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

Al Drago | Bloomberg | Getty Images

On Monday, the Securities and Exchange Commission said it has charged 11 people for their role in creating and promoting a supposedly fraudulent cryptopyramid and Ponzi scheme that raised more than $300 million from investors.

The scheme, called Forsage, claimed to be a decentralized smart contract platform, and it enabled millions of retail investors to transact through smart contracts that ran on the ethereum, tron ​​and binance blockchains. But under the hood, the SEC claims the setup functioned as a standard pyramid scheme for more than two years, in which investors made profits by recruiting others into the operation.

In a statement, the SEC added that Forsage operated a typical Ponzi structure, reportedly using assets from new investors to pay off previous ones.

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

“Scammers cannot get around federal securities laws by focusing their schemes on smart contracts and blockchains.”

Forsage declined to offer a method of contacting the company through its support platform and did not comment.

Four of the 11 individuals charged by the SEC are founders of Forsage. Their current whereabouts are unknown, but they were last known to have lived in Russia, the Republic of Georgia and Indonesia.

The SEC has also sued three US-based promoters who endorsed Forsage on their social media platforms. They were not mentioned in the commission’s release.

Forsage was launched in January 2020 and regulators around the world had tried a number of different times to shut it down since then. First in September 2020 by the Securities and Exchange Commission of the Philippines and later in March 2021 by the Montana Securities and Insurance Commissioner, forsage strikes were launched. Despite this, the defendants continued to promote the scheme, while denying the allegations in several YouTube videos and in other ways.

Two of the defendants, neither admitting nor denying the charges, agreed to settle the charges, subject to court approval.



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