Crypto has had a miserable month and it’s only the third day of August

The scheme, called Forsage, claimed to be a decentralized smart contract platform, allowing millions of retail investors to transact via smart contracts that operated on the ethereum, tron ​​and binance blockchains. The SEC alleges that for more than two years the setup operated as a standard pyramid scheme, where investors made profits by recruiting others into the operation.

In the SEC’s formal complaint, Wall Street’s top watchdog calls Forsage a “textbook pyramid and Ponzi scheme,” in which Forsage aggressively promoted its smart contracts through online campaigns and new investment platforms, all while selling “no actual consumer product.” The complaint adds that “the primary way for investors to make money from Forsage was to recruit others into the scheme.”

The SEC said Forsage operated a typical Ponzi structure, in which it allegedly used assets from new investors to make earlier payments.

“As the complaint alleges, Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors,” wrote Carolyn Welshhans, acting head 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.”

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

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

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

Forsage was launched in January 2020. Regulators around the world have tried a couple of times to shut it down. Cease-and-desist lawsuits were first filed against Forsage in September 2020 by the Securities and Exchange Commission of the Philippines. In March 2021, the Montana Securities and Insurance Commissioner tried the same thing. Despite this, the defendants allegedly continued to promote the scheme while denying the allegations in several YouTube videos and in other ways.

Two of the defendants, both of whom neither admitted nor denied the charges, agreed to settle the charges, subject to court approval.

The nature of the bug meant that users did not need any programming skills to exploit it. Others caught on and deployed armies of bots to carry out copycat attacks.

“Without prior programming experience, any user can simply copy the original attacker’s transaction call data and replace the address with theirs to exploit the protocol,” said Victor Young, founder and chief architect of crypto startup Analog.

“Unlike previous attacks, the Nomad hack became a free-for-all where multiple users began draining the network by simply replaying the original attackers’ transaction call data.”

Blockchain bridges are a popular way to move tokens away from networks like Ethereum, which have gained a reputation for slow transaction times and high fees, to cheaper, more efficient blockchains. But sloppy programming choices have made them a prime target for hackers trying to swindle investors out of millions. More than $1 billion in crypto has been lost to bridge exploits so far in 2022, according to blockchain analytics firm Elliptic.

“I can only hope that developers and projects will learn that they are running a critical piece of software,” Adrian Hetman, technical director at Web3 security firm Immunefi, told CNBC.

“They have to keep safety first and be safety first in every business decision because they’re dealing with people’s money, a lot of that money is locked up in these contracts.”

Nomad said it is working with crypto-security firm TRM Labs and law enforcement to track the movement of funds, identify the perpetrators of the attack and return stolen tokens to users.

“Nomad is committed to keeping its community updated as it learns more in the coming hours and days and appreciates all those who acted quickly to protect funds,” the company said in the statement.

And then on Tuesday night, unknown attackers came after hot wallets connected to Solana’s blockchain.

Solana’s sol token, one of the biggest cryptocurrencies after bitcoin and ether, fell about 8% in the first two hours after the hack was first discovered, according to data from CoinMarketCap. It is currently down approx. 1%, while the trading volume is up approx. 105% in the last 24 hours.

As of Tuesday evening, several users began reporting that assets held in “hot” wallets — that is, Internet-connected addresses, including Phantom, Slope and Trust Wallet — had been drained of funds.