Elain Brown Tech 08.02.2022 05:Aug AM EDT

SEC Charges Individuals Behind the $300 Million Crypto Pyramid and Ponzi Scheme

The Securities and Exchange Commission (SEC) is holding the individuals behind the Forsage crypto pyramid scheme accountable.

On August 1, the SEC initiated legal action against Forsage's original promoters and founders in the United States District Court located in the state of Illinois.

11 people have been charged for the alleged role they played in the creation of a fraudulent crypto-pyramid scheme platform that fueled a $300 million textbook pyramid and Ponzi scheme.

According to the SEC, the fraudulent crypto pyramid and Ponzi schemes bilked more than $300 million from millions of retail investors all over the world.

Crypto Pyramid and Ponzi Scam

The crypto scam that Forsage functions through is the typical Ponzi structure. The older investors of Forsage would recruit new investors to join the platform and invest in assets so that their recruiters would get a payment through a shared sum of the money.

This crypto pyramid scheme unfortunately traveled to multiple countries across the globe, including countries like Russia and the United States.

According to Cointelegraph, the SEC charged 11 individuals who had significant roles in creating the crypto platform. These include the four founders of Forsage who were detected to be residing in Indonesia, the Republic of Georgia, and Russia.

The SEC also charged three individuals based here in the United States who were in charge of the platform's promotions and who were hired by the founders to endorse the decentralized crypto platform on their social media platforms and the website they created.

The government agency also charged selected individuals that run the largest promotional group that are members of the platform of people who are called "Crypto Crusaders" and operate in five different states in the country.

Additionally, aside from the SEC filing complaints against the people behind Forsage, the SEC also charges numerous individuals for violating the registration and anti-fraud provisions of the federal securities laws.

The action filed by the SEC asks for injunctive relief, disgorgement, and civil penalties. A fraudulent investment scheme known as a Ponzi scheme is one in which existing investors are paid with funds collected from new investors.

These schemes frequently seek out new investors by making the promise to put their money into opportunities that offer high returns with relatively low levels of risk.

The Crypto Platform's Operation

According to the complaint filed by the SEC, Vladimir Okhotnikov, Jane Doe, also known as Lola Ferrari, Sergey Maslakov, and Mikhail Sergeev launched Forsage.io in January 2020.

This was a website that enabled millions of retail investors to engage in transactions through the use of smart contracts that ran on the Binance, Tron, and Ethereum blockchains.

On the other hand, there are allegations that Forsage has been operating as a pyramid scheme for over two years, in which participants earn profits by convincing others to join the scheme.

In September 2020, the Securities and Exchange Commission of the Philippines issued a cease-and-desist order against the operation of Forsage, putting a halt to its crypto pyramid scheme.

On the same note, in March 2021, the Montana Commissioner of Securities and Insurance also issued the same warning about the operation of the crypto platform.

However, despite the multiple orders they were served, the platform continued to promote their ponzi and pyramid schemes. According to the allegations, Forsage followed a typical Ponzi scheme by using the assets acquired from new investors to pay off earlier investors.