SEC has filed a lawsuit in the U.S. District Court against the founders
and promoters of Forsage who allegedly fueled a $300 million “textbook
pyramid and Ponzi scheme”
The Securities and Exchange Commission (SEC) has charged 11
individuals for their alleged role in the creation of a "fraudulent
crypto pyramid scheme" platform Forsage.
The charges were laid in
a United States District Court in Illinois on August 1, with the SEC
alleging that the founders and promoters of the platform used the
“fraudulent crypto pyramid and Ponzi scheme” to raise more than $300
million from “millions of retail investors worldwide.”
The SEC
complaint states that Forsage was modeled such that investors would be
financially rewarded by recruiting new investors to the platform in a
"typical Ponzi structure," which spanned multiple countries including
the United States and Russia.
According to the SEC, a Ponzi
scheme is an investment fraud that pays existing investors with funds
collected from new investors. These schemes often solicit new investors
by promising to invest funds in opportunities that generate high returns
for little risk.
In the court document, the SEC stated that:
“It
[the Forsage platform] did not sell or purport to sell any actual,
consumable product to bona fide retail customers during the relevant
time period and had no apparent source of revenue other than funds
received from investors. The primary way for investors to make money
from Forsage was to recruit others into the scheme.”
According
to the SEC, Forsage’s alleged Ponzi scheme works by firstly enabling
new investors to set up a crypto-asset wallet and purchase “slots” from
Forsage’s smart contracts.
Those slots would give them the right
to earn compensation from others whom they recruited into the scheme,
referred to as “downlines”, and also from the community of Forsage
investors in the form of profit sharing, referred to as “spillovers”.
Carolyn
Welshhans, Acting Chief of the SEC’s Crypto Assets and Cyber Unit
called Forsage a “fraudulent pyramid scheme launched on a massive scale
and aggressively marketed to investors."
She also added that decentralized technologies cannot act as an escape route for illegal conduct:
"Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains."
In
addition to the four founders, who include Vladimir Okhotnikov, Jane
Doe aka Lola Ferrari, Mikhail Sergeev, and Sergey Maslakov, the SEC’s
complaint also included seven promoters, three of which were in a
U.S.-based promotional group called the “Crypto Crusaders”.
All 11
individuals have been charged with violating “Unregistered Offers and
Sales of Securities” under Section 5 A & C and “Fraud” under Section
17(a) (1 & 3) of the US Securities Act. The defendants have also
been charged with “Fraud” under Section 10 B-C of the US Exchange Act.
These
efforts enabled the Ponzi structure to capture the massive scale that
it achieved from retail investors buying into the model over the last
two years, said Welshhans.
Related: How to identify and avoid a crypto pump-and-dump scheme?
In September 2020, Forsage was subject to cease-and-desist orders from the Philippines SEC. In March 2021, the platform also received cease and desist orders from the Montana Commissioner of Securities and Insurance.
Forsage’s YouTube
channel shows that their platform was promoted as little as ten days
ago. The platform’s Twitter account also appears active.
source link : https://cointelegraph.com/news/sec-charges-11-individuals-over-300m-crypto-pyramid-scheme
