The US Securities and Exchange Commission (SEC) has charged 11 people for their involvement and promotion of website Forsage.io connected to a crypto pyramid and ponzi scheme that raised more than $300m.
The SEC outlines that the ponzi scheme drew millions from retail investors worldwide, in particular the United States. Forsage founders, Vladimir Okhotnikov, Lola Ferrari, Mikhail Sergeev, and Sergey Maslakov facilitated millions via smart contracts that operated on the Binance, Ethereum, and Tron blockchains.
Along with its four founders, who were last known to be living across Russia, Indonesia, and the Republic of Georgia, three US-based individuals were also charged for promoting Forsage on social media platforms.
Several members of the ‘Crypto Crusaders’ – the largest promotional group for the scheme – were also charged having operated in up to five different US states.
Forsage operated as a pyramid for more than two years, according to the SEC, where it earned profits by recruiting members to its ponzi scheme, using assets from new investors to pay earlier investors.
“As the complaint alleges, Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors,” stated Carolyn Welshhans, Acting Chief of SEC’s Crypto Assets and Cyber Unit.
“Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.”
The 11 individuals charged by the SEC continued to promote the pyramid scheme despite cease-and-desist actions being imposed on Forsage for fraudulent activity in September 2020, and also by a similar regulatory body in the Philippines.
Two of the defendants, Ellis and Theissen, agreed to settle the charges despite admitting or denying the allegations.
This latest action by the SEC is one of many it has undergone in its attempt to create a secure crypto environment in the US.
The US watchdog is currently embroiled in a legal case with crypto solutions provider Ripple over alleged claims its XRP token facilitated unregistered offerings.