Forsage’s founders charged for $300 million fraud

The US Securities and Exchange Commission (SEC) has charged 11 people with defrauding hundreds of consumers out of $300 million as part of Forsage’s so-called crypto pyramid scam.

Regulators have increasingly increased their crackdown on questionable enterprises that defraud their customers.

Members of the American group “The Crypto Crusaders,” which promoted the scheme, as well as three other US-based promoters, were also charged. Cheri Beth Bowen, Ronald R. Deering, Samuel D. Ellis, Mark F. Hamlin, Carlos L. Martinez, Alisha R. Shepperd, and Sarah L. Theissen are the other seven persons of interest.

Okhotnikov, Ferrari, Sergeev, and Maslakov are thought to be living in Russia, Indonesia, and the Republic of Georgia, putting them out of reach of the United States. However, according to the SEC press release, Samuel D. Ellis and Sarah L. Theissen have agreed to resolve the accusations without formally “admitting or denying the allegations.”

“What even is Forsage?”

The Forsage pyramid scheme was founded in 2020 by four individuals: Vladimir Okhotnikov of Georgia, Jane Doe, aka Lola Ferrari of Indonesia, Mikhail Sergeev, and Sergey Maslakov of Russia (both hailed from Russia). During the Covid-19 outbreak, it was very popular as a way for investors to profit from bitcoin transactions and “affiliate marketing.”

The platform enables investors to deal in tokens across many networks. Ethereum, BSC, and Tron are among them. Users were rewarded with referral bonuses for getting people to register under them, and returns on recruit deposits were given to older investors.

According to Dune Analytics, Forsage swiftly became one of the most popular decentralized apps on the Ethereum blockchain, accounting for a fifth of the network’s bandwidth and gas consumption.
Conversely, the SEC alleges that the smart contracts on the three blockchains were all forgeries. According to the report, this system worked like a conventional pyramid scheme for more than two years beneath the surface.
The Philippines’ Securities and Exchange Commission (SEC) issued a cease-and-desist order to the corporation in 2020 for fraudulently operating in the country.

A similar order had been issued to Forsage by the Montana Commissioner of Securities and Insurance in 2021.
The defendants allegedly continued to promote the scheme and denied any wrongdoings via numerous communication channels, including YouTube videos. Investors allegedly disregarded the notion that Forsage is a Ponzi scheme and continued to promote it on social media channels.

The SEC stated that “all reimbursements to early investors were paid using cash received from later investors.”

The SEC also charged three people with insider trading, including a former Coinbase product manager. It also accused Coinbase of allowing securities to be listed on its platform.

The indictment of the Forsage founders is just the latest in the SEC’s efforts to crack down on cryptocurrency fraud schemes. They are both commendable and important, given the rate at which scams in the cryptocurrency industry are expanding as crypto use grows.