SEC charges 11 people from Forsage with Crypto Pyramid Scheme

The US Securities Exchange Commission (SEC) has charged 11 people, including the founders, promoters of alleged “crypto pyramid scheme” Forsage.

The claims was filed by the SEC in a US District Court in Illinois on August 1. The SEC alleged that the founders and promoters of the platform used the “fake crypto-pyramid and Ponzi scheme” to raise over $300 million from “millions of retail investors” globally. .

The official complaint stated that Forsage did not sell or claim to sell any actual “consumer product” to legitimate retail customers during the relevant time period and “had no apparent source of income other than funds received from investors”.

The most basic way for investors to make money on Forsage was by recruiting others to the scheme.

The SEC complaint further said that Forsage was designed so that investors would be financially rewarded by recruiting new investors to the platform in a “typical Ponzi structure,” which spanned multiple countries such as the United States and Russia.

According to the SEC, Forsage’s alleged Ponzi scheme was implemented by first asking new investors to set up a crypto-asset wallet and directing them to buy “slot machines” from Forsage’s smart contracts.

The slot machines give users the right to earn remuneration from others they joined the scheme, referred to as “downlines”. Remuneration was also earned from Forsage investors in the form of profit sharing, called “spillovers”.

Carolyn Welshhans, an SEC official, called Forsage a “fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors.”

Welshhans further added that fraudsters cannot circumvent 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, three of whom were in the US-based campaign group called “Crypto Crusaders”.

The foreign-based founders were last reported to be living 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 conduct provisions.

The accused have been charged with “unregistered offer and sale of securities” under Section 5 A & C and “fraud” under Section 17(a) (1 and 3) of the US Securities Act. All 11 accused have also been charged with “fraud” in accordance with section 10 BC. in the US Exchange Act.

Welshhans elaborated that the accused had carried out the Ponzi scheme on such a massive scale that retail investors were lured into buying the model over the past two years.

Scandals are nothing new for Forsage! As previously, the company had received cease and desist letters back in September 2020 and March 2021.

Also read: US DOJ charges six people in $100M Crypto Ponzi