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SEC Indicts 11 People in Alleged $300M Crypto Ponzi Scheme

A flag outside the headquarters of the United States Securities and Exchange Commission in Washington, DC, U.S., Wednesday, February 23, 2022.

Al-Draco | Bloomberg | Getty Images

The Securities and Exchange Commission on Monday filed a civil complaint charging 11 people for their role in creating and promoting an allegedly fraudulent crypto-focused pyramid scheme that has raised more than $300 million from investors.

The program, called Forsage, claimed to be a decentralized smart contract platform and allowed millions of retail investors to transact via smart contracts running on the Ethereum, Tron, and Binance blockchains. But under the hood, the SEC alleges that for more than two years, the setup operated as a standard pyramid scheme, in which investors made profits by recruiting others into the operation.

In the official SEC complaint, Wall Street’s top watchdog calls Forsage a “textbook pyramid and Ponzi scheme,” in which Forsage aggressively promoted its smart contracts through online promotions and news. investment platforms, while selling “no real consumable products”. The complaint goes on to say that “the primary way investors made money from Forsage was to recruit others into the scheme.”

In a statement, the SEC added that Forsage was operating a typical Ponzi scheme, in which it would have used assets from new investors to pay off previous ones.

“As the complaint alleges, Forsage is a fraudulent pyramid scheme launched at scale and aggressively marketed to investors,” wrote Carolyn Welshhans, acting head of the SEC’s Crypto Assets and Cyber ​​Unit.

“Fraudsters cannot circumvent 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 comment.

Four of the eleven people indicted 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 also indicted 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 and regulators around the world have repeatedly tried to shut it down since then. Cease and desist actions were filed against Forsage first in September 2020 by the Philippines Securities and Exchange Commission and then, in March 2021, by the Montana Securities and Insurance Commissioner. 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, who neither admitted nor denied the allegations, agreed to settle the charges, subject to court approval.


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