SEC indicts 11 people over alleged $300 million crypto Ponzi scheme

A flag outside the headquarters of the US Securities and Exchange Commission in Washington, DC, US, Wednesday, February 23, 2022.

Al Drago | Bloomberg | Getty Images

On Monday, the Securities and Exchange Commission said it charged 11 people for their roles in creating and promoting an alleged fraudulent crypto pyramid and Ponzi scheme that raked in more than $300 million from investors.

The system, called Forsage, claimed to be a decentralized smart contract platform, and it allowed millions of retail investors to trade smart contracts that operated on the ethereum, tron ​​and binance blockchains. But under the hood, the SEC alleges that for more than two years, the setup operated like a standard pyramid scheme, with investors profiting by recruiting others into the operation.

In a statement, the SEC added that Forsage operated a typical Ponzi scheme, where it allegedly used assets from new investors to pay off previous assets.

“As stated in the complaint, Forsage is a fraudulent pyramid scheme launched on a massive scale and marketed to investors,” wrote Carolyn Welshhans, Acting Director of the SEC’s Crypto Assets and Cyber ​​​​Unit.

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

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

Four of the eleven individuals charged by the SEC are founders of Forsage. Their whereabouts are unknown, but they were last known to be living in Russia, Georgia and Indonesia.

The SEC has also charged three promoters in the US who supported Forsage on their social media. They were not mentioned by name in the committee’s announcement.

Forsage was launched in January 2020 and regulators around the world had tried several times to shut it down since then. Harassment lawsuits were filed against Forsage first in September 2020 by the Securities and Exchange Commission of the Philippines and later, in March 2021, by the Montana Securities and Insurance Commission. Despite this, the defendants continued to promote the scheme while denying the claims in several YouTube videos and other means.

Two of the defendants, who neither admitted nor denied the allegations, agreed to settle the charges pending court approval.

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