CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

SEC charges 11 people in ‘massive’ $300m crypto Ponzi scheme

By Daniela Ešnerová

12:11, 2 August 2022

Illustration of SEC logo
The sanctioned individuals are said to have “aggressively marketed the scheme to retail investors. – Photo: Shutterstock

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.

Bitcoin (BTC) dipped some 3% and the rest of the digital assets market followed.

What is your sentiment on BTC/USD?

63859.00
Bullish
or
Bearish
Vote to see Traders sentiment!

BTC to US Dollar

 

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.

ETH/USD

3,416.83 Price
-0.070% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 6.00

BTC/USD

63,859.00 Price
-1.120% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00

BCH/USD

383.85 Price
+1.510% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 2.50

DOGE/USD

0.12 Price
-3.160% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.0012872

“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”.

ETH to USD

Markets in this article

BTC/USD
Bitcoin / USD
63859.00 USD
-721.35 -1.120%
ETH/USD
Ethereum / USD
3416.83 USD
-2.48 -0.070%
TRX/USD
TRON / USD
0.13641 USD
-0.00025 -0.190%

Rate this article

Related reading

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided in this article is for information purposes only and should not be understood as investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents and has not been prepared in accordance with the legal requirements designed to promote investment research independence. While the information in this communication, or on which this communication is based, has been obtained from sources that Capital.com believes to be reliable and accurate, it has not undergone independent verification. No representation or warranty, whether expressed or implied, is made as to the accuracy or completeness of any information obtained from third parties. If you rely on the information on this page, then you do so entirely at your own risk.

Still looking for a broker you can trust?

Join the 630,000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading