Fraud (photo freepik, unsplash, pixabay)
The U.S. Securities and Exchange Commission on Monday filed a civil complaint against 11 people for their role in creating and promoting an alleged crypto-fraud targeted pyramid scheme that raised more than $300 million from investors.
The program, called Forsage, claimed to be a decentralized smart contract platform, and it allowed millions of retail investors to enter into trades using smart contracts that ran on the ethereum, tron and binance blockchains. But under the hood, the SEC alleges that for more than two years, the scheme operated like a standard pyramid scheme, where investors made profits by recruiting others to the operation.
In the SEC’s official complaint, Wall Street’s top watchdog calls Forsage a “textbook pyramid scheme and Ponzi,” in which Forsage aggressively promoted its smart contracts through online promotions and new investment platforms while selling “no actual consumable product. ” The complaint goes on to say that “the primary way investors made money from Forsage was to recruit others into the program.”
In a statement, the SEC added that Forsage operated a typical Ponzi scheme, in which it allegedly used the assets of new investors to pay off previous ones.
“As alleged in the complaint, Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketing to investors,” wrote Carolyn Walshhans, Acting Chief of the SEC’s Crypto and Cyber Unit.
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“Fraudsters cannot circumvent federal securities laws by targeting their schemes on smart contracts and blockchain.” Forsage, through its support platform, declined to offer a method of contacting the company and there was no response.
Four of the eleven people charged by the SEC are Forsage founders. Their current whereabouts are unknown, but they were recently known to live in Russia, the Republic of Georgia and Indonesia.
The SEC also charged three US entrepreneurs who endorsed Forsage on their social media platforms. They were not named in the commission’s notice.
Forsage launched in January 2020, and regulators around the world have tried several times to shut it down since then. Cease and desist actions 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 Commissioner. Despite this, the defendants allegedly continued to promote the program while denying the claims in several YouTube videos and other means.
Two of the defendants, neither of whom admitted or denied the charges, agreed to settle the charges, subject to court approval.
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