SEC Charges 11 in Alleged $300M Crypto Pyramid Scheme Forsage

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  • Founders of the alleged scheme were last known to be liv­ing in Rus­sia, Indone­sia and the Repub­lic of Georgia 
  • Fraud­sters can­not cir­cum­vent secu­ri­ties laws by focus­ing their schemes on smart con­tracts and blockchains, SEC offi­cial says

The SEC charged has charged 11 peo­ple for alleged­ly cre­at­ing and pro­mot­ing a fraud­u­lent cryp­to pyra­mid and Ponzi scheme that raised more than $300 mil­lion from retail investors.

For­sage launched in Jan­u­ary 2020 and claimed to allow investors to enter into lucra­tive deals pow­ered by smart con­tracts that oper­at­ed on the Ethereum, Tron and Binance blockchains, accord­ing to the SEC. 

But, the agency said in a Mon­day state­ment that investors earned prof­its by recruit­ing oth­ers into the scheme. For­sage also alleged­ly used assets from new investors to pay ear­li­er investors — the hall­mark of a Ponzi scheme.

The SEC’s com­plaint charges For­sage founders Vladimir Okhot­nikov, Lola Fer­rari, Mikhail Sergeev and Sergey Maslakov, who were last known to be liv­ing in Rus­sia, the Repub­lic of Geor­gia and Indone­sia. It also charges three US-based pro­mot­ers tasked with endors­ing the plat­form on its web­site and social media, as well as sev­er­al mem­bers of a group called Cryp­to Cru­saders — a unit oper­at­ing out of five dif­fer­ent states that adver­tised the scheme. 

“As the com­plaint alleges, For­sage is a fraud­u­lent pyra­mid scheme launched on a mas­sive scale and aggres­sive­ly mar­ket­ed to investors,” Car­olyn Welsh­hans, act­ing chief of the SEC’s cryp­to assets and cyber unit, said in a state­ment. “Fraud­sters can­not cir­cum­vent the fed­er­al secu­ri­ties laws by focus­ing their schemes on smart con­tracts and blockchains.”

The SEC of the Philip­pines issued a cease-and-desist action against For­sage in Sep­tem­ber 2020, as did the Mon­tana Com­mis­sion­er of Secu­ri­ties and Insur­ance in March 2021. But the defen­dants denied the claims in YouTube videos and alleged­ly con­tin­ued the scheme, accord­ing to the SEC.

Forsage’s YouTube chan­nel, which is still online, claims that its users have gen­er­at­ed “700,000 in Ethereum” and “1,700,000 in TRON” and $57 mil­lion in sta­ble­coin binance USD. A video promis­ing “a new launch” was pub­lished 10 days ago.

The SEC’s com­plaint seeks injunc­tive relief, dis­gorge­ment and civ­il penalties.

Two of the defen­dants, Ken­tucky res­i­dent Samuel Ellis and Wis­con­sin res­i­dent Sarah Theis­sen, agreed to set­tle the charges. Ellis agreed to pay dis­gorge­ment and civ­il penal­ties, accord­ing to the SEC, while Theis­sen will be required to pay dis­gorge­ment and civ­il penalties.

Reg­u­la­tors have so far been busy tar­get­ing cryp­to-relat­ed fraud this year. The Com­mod­i­ty Futures Trad­ing Com­mis­sion (CFTC) charged four indi­vid­u­als in March with fraud sur­round­ing an alleged cryp­to Ponzi scheme that raised more than $44 mil­lion of bitcoin.

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  • Ben Strack
    Ben Strack is a Den­ver-based reporter cov­er­ing macro and cryp­to-native funds, finan­cial advi­sors, struc­tured prod­ucts, and the inte­gra­tion of dig­i­tal assets and decen­tral­ized finance (DeFi) into tra­di­tion­al finance. Pri­or to join­ing Block­works, he cov­ered the asset man­age­ment indus­try for Fund Intel­li­gence and was a reporter and edi­tor for var­i­ous local news­pa­pers on Long Island. He grad­u­at­ed from the Uni­ver­si­ty of Mary­land with a degree in journalism.

    Con­tact Ben via email at [email pro­tect­ed]

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