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

The US market regulator alleged Forsage ran a pyramid scheme “for more than two years”

US Securities and Exchange Commission seal as seen on a smartphone                                 
The US SEC has charged 11 people for creating and promoting a “fraudulent crypto pyramid and Ponzi scheme” named as Forsage – Photo: Getty Images
                                

The US Securities and Exchange Commission (SEC) has charged 11 individuals for creating and promoting Forsage, which the SEC described as a “fraudulent crypto pyramid and Ponzi scheme” that raised more than $300m (£245m) from retail investors.

The SEC’s charges were brought to the US District Court in the Northern District of Illinois against the four alleged founders of Forsage, Vladimir Okhotnikov, Jane Doe (real name Lola Ferrari), Mikhail Sergeev, and Sergey Maslakov.

The four launched Forsage in January 2020, according to the SEC, and they are said to be living in Russia, the Republic of Georgia, and Indonesia.

Also charged are three US-based promoters who endorsed Forsage via social media platforms and several others who called themselves the ‘Crypto Crusaders’.

The SEC explained that Forsage allegedly operated 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.”

Forsage is said to be a “a website that allowed millions of retail investors to enter into transactions via smart contracts that operated on the Ethereum, Tron, and Binance blockchains.”

Previous cease-and-desist actions

Previously, the Securities and Exchange Commission of the Philippines launched a cease-and-desist actions against Forsage for operating as a fraud in September 2020. Then in March 2021 the US Montana Commissioner of Securities and Insurance also sent cease-and-desist actions against Forsage.   

In addition, the SEC’s complaint “seeks injunctive relief, disgorgement, and civil penalties” against those it has claimed are involved.

A massive ‘fraudulent pyramid scheme’

Carolyn Welshhans, acting chief of the SEC’s Crypto Assets and Cyber Unit, said: “As the complaint alleges, Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors.

“Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.”

The SEC’s investigation was conducted by Liz Canizares and Pamela Sawhney of the Crypto Assets and Cyber Unit and supervised by Amy Friedman and Welshhans.

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