SEC charges 11 people in ‘massive’ $300m crypto Ponzi scheme
12:11, 2 August 2022
The Securities and Exchange Commission (SEC) charged 11 people for their alleged role in a “fraudulent pyramid scheme launched on a massive scale” and “aggressively marketing [the scheme] to investors.” With $300m raised from investors, the alleged fraud Forsage, would rank as one of the five biggest crypto Ponzi schemes to date.
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Eleven people - including those living in Russia, Republic of Georgia, and Indonesia and United States face charges for their roles in allegedly “creating and promoting Forsage, a fraudulent crypto pyramid and Ponzi scheme that raised more than $300m from millions of retail investors worldwide.”
The SEC said defendants agreed to settle the charges, one agreed to pay undisclosed penalties and another will be required to pay penalties determined by the court.
‘Typical Ponzi structure’
According to the SEC’s complaint, in January 2020, Vladimir Okhotnikov, Jane Doe a/k/a Lola Ferrari, Mikhail Sergeev, and Sergey Maslakov launched Forsage.io, a website that allowed millions of retail investors to enter into transactions via smart contracts that operated on the Ethereum, Tron, and Binance blockchains.
“However, Forsage allegedly has operated as a pyramid scheme for more than two years, in which investors earned profits by recruiting others into the scheme. Forsage also allegedly used assets from new investors to pay earlier investors in a typical Ponzi structure,” the complaint reads.
The defendants allegedly went on to promote Forsage even after cease-and-desist actions against Forsage for operating as a fraud in September 2020 by the Securities and Exchange Commission of the Philippines and in March 2021 by the Montana Commissioner of Securities and Insurance.
“As the complaint alleges, Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors," said Carolyn Welshhans, Acting Chief 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.”
The biggest crypto Ponzi scheme said to have defrauded investors of $5.9bn
Forsage is said to have raised $300m from the investors, but the biggest crypto Ponzi scheme is bigger by some magnitude. Onecoin, founded by the infamous cryptoqueen, Ruja Ignatova, is said to have defrauded investors of $5.9bn between 2014 and 2019.
According to a list of the biggest crypto Ponzi schemes, compiled by CoinMarketCap.com, Forsage with $300m would claim a shared fourth biggest crypto Ponzi scheme.
Please leave and don't pollute Ethereum blockchain
In reaction to the news, Ethereum co-founder Vitalik Buterin, re-shared a two-year-old message to scammers on Twitter: “Please leave and don't pollute Ethereum blockchain”.
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Call out scammers. You get hate in the moment, but time vindicates you.
— vitalik.eth (@VitalikButerin) August 2, 2022
Even if you're some CEO with a "reputation" and need for "professionalism", do it anyway and be savage. People look up to you and your warning will be taken seriously. pic.twitter.com/XXYuXpWYl4
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