August 9, 2022

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SEC indicts 11 people in $300 million crypto Ponzi scheme

SEC indicts 11 people in $300 million crypto Ponzi scheme

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

Drago | Bloomberg | Getty Images

on Monday, The Securities and Exchange Commission said Eleven people have been accused of their roles in creating and promoting an alleged crypto pyramid and Ponzi scheme that raised more than $300 million from investors.

The scheme, called Forsage, is a decentralized smart contract platform that allows millions of individual investors to enter into transactions via smart contracts that run on raisedand tron ​​and Binance Blockchain. Under the hood, however, the SEC claims that for more than two years, the setup has functioned as a standard pyramid scheme, where investors cash in profits by recruiting others into the process.

In a statement, the Securities and Exchange Commission added that Forsage operates a typical Ponzi structure, in which it allegedly used assets from new investors to pay former investors.

“As the complaint alleges, Forsage is a widespread fraudulent pyramid scheme that has been launched and aggressively marketed to investors,” Carolyn Welshans, acting head of the Securities and Exchange Commission’s crypto-asset and cyber unit, wrote.

“Scammers cannot circumvent federal securities laws by focusing their schemes on smart contracts and blockchain.”

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

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

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The Securities and Exchange Commission has also indicted three US-based promoters who endorsed Forsage on their social media platforms. Their names were not mentioned in the commission’s statement.

Forsage launched in January 2020, and regulators around the world have tried several different times to shut it down since then. The stay and stay lawsuits against Forsage were first filed in September of 2020 by the Philippines Securities and Exchange Commission, and later, in March 2021, by the Montana Securities and Insurance Commissioner. Despite this, the accused allegedly continued to promote the scheme while denying the allegations in several YouTube videos and by other means.

Two of the defendants, both of whom did not confess or deny the allegations, agreed to settle the charges, subject to court approval.