The Securities and Exchange Commission (SEC) has charged 11 people for their roles in allegedly creating and promoting fraudulent cryptocurrency pyramid and Ponzi scheme Forsage, which raised $300 million from millions of retail investors around the world, according to a Monday (Aug. 1) press release.
Among those charged were the four founders of Forsage, of Russia, the Republic of Georgia, and Indonesia; three U.S.-based promoters who endorsed Forsage on its website and social media platforms; and several members of the Crypto Crusaders, the largest promotional group for the scheme.
In January 2020, Vladimir Okhotnikov, Jane Doe (also known as Lola Ferrari), Mikhail Sergeev and Sergey Maslakov launched Forsage.io, a website that allowed millions of retail investors to enter into transactions via smart contracts that operated on the Ethereum, Tron and Binance blockchains, according to the press release.
Forsage allegedly has operated as a pyramid scheme for more than two years, with investors earning profits by recruiting others, using assets from new investors to pay earlier investors in a Ponzi scheme structure, the press release says.
The SEC of the Philippines filed cease-and-desist actions against Forsage for allegedly operating as a fraud in September 2020, with the Montana Commissioner of Securities and Insurance taking similar actions in March 2021, but the defendants allegedly continued to promote Forsage, denying the claims in several YouTube videos and other means.
“As the complaint alleges, Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors,” SEC Crypto Assets and Cyber Unit Acting Chief Carolyn Welshhans said in the press release. “Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.”
Related: FBI Warns Fake Crypto Apps Robbed Investors of Millions
Last month, the FBI warned investors and financial institutions (FIs) that fraudulent cryptocurrency apps tricked 244 victims out of $42.7 million between October 2021 and May 2022. The fake apps were designed to encourage victims to deposit their cryptocurrency holdings and then charged them a tax to make withdrawals, which they were never able to make.
In one instance, scammers spoofed the brand of defunct crypto exchange Yibit, a formerly legitimate cryptocurrency exchange that the FBI said appeared to have closed in 2018. At least four victims deposited $5.5 million using the fake app from October 2021 to May 2022.
In another incident, cyber-criminals used the name of the Australian currency exchange provider Supay and created a fake app. Two people were defrauded in November 2021, with one being told to make a minimum deposit of $900,000.
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