SEC charges 11 people in alleged $300 million Cryptocurrency Ponzi scheme

SEC charges 11 people in alleged $300 million Cryptocurrency Ponzi scheme

 

The U.S. Securities and Exchange Commission (SEC) on Monday filed a civil grievance charging 11 people for their involvement in forming and promoting an allegedly fraudulent Cryptocurrency-intensive pyramid scheme that raised more than $300 million from investors.

 

The fraudulent scheme, called Forage, apparently claimed to be a decentralized smart contract platform, and it allowed millions of retail investors to enter into payments via smart contracts that operated on the Ethereum, Tron and Binance, Blockchain Technologies. The SEC alleges that for more than two years, under the hood, the scheme functioned like a typical pyramid scheme, in which investors earned extra profits by bringing other users into the operation. 

 

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In the SEC is a formal complaint, Wall Street is watchdog calls Forsage a “textbook pyramid and Ponzi scheme,”  in which Forsage aggressively advertised its smart contracts through online marketing and new investment platforms, despite all the while not selling “any actual, consumable product.” The complaint goes on further to say that “the primary way for investors to make money from Forsage was to recruit other users into the scheme.”

 

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In a statement, the SEC mentioned that Forsage operated a standard Ponzi scheme structure, wherein it allegedly used Digital Assets from new investors to pay earlier ones.

 

 

Acting chief of the SEC is Crypto Assets and the cyber unit, Carolyn Welshhans wrote that just like the complaint alleges Forsage is a sham pyramid scheme operated on a massive scale and aggressively promoted to investors.

 

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She added that “Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.”

 

Forsage, through its support platform, rejected to offer a way for contacting the company and did not offer to comment on the SEC complaint.

 

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Four of the eleven people charged by the SEC are Forsage founders and co-founders. Their current whereabouts are unknown as of now, but they were last known to be seen and living in Russia, the Republic of Georgia and Indonesia.

 

The SEC has also charged three U.S.-based supporters who endorsed Forsage on their social media platforms. They were not named in the commission’s release of the complaint.

 

The company was launched in January 2020, and regulatory bodies around the world had tried a couple of times to shut it down since then. Cease-and-desist actions were brought against the company for the first time in September 2020 by the Philippines Securities and Exchange Commission, and later, in March 2021, by the Montana commissioner of securities and insurance. Despite such rules, the defendants allegedly sustained promoting the fraudulent smart contract scheme while denying the claims in several YouTube videos and by other means.

 

Two of the defendants, both of whom did not accept or deny the allegations, decided to settle the charges, subject to the court's approval.