SEC charges 11 people in $300 million Ponzi scheme linked to crypto-currencies

The U.S. Securities and Exchange Commission (SEC) has indicted four founders and seven promoters of Forsage, which it described as “a fraudulent cryptographic Ponzi scheme“. The scheme reportedly collected more than $300 million from millions of individual investors worldwide.

SEC takes action against crypto-currency system Forsage

The SEC announced Monday that it has “charged 11 people for their roles in creating and promoting Forsage, a fraudulent crypto Ponzi scheme.“The securities regulator explained that the Forsage scheme raised more than $300 million from millions of individual investors around the world.

The 11 defendants include four Forsage founders, three U.S. promoters of the scheme, and “several members of the so-called Crypto Crusaders – the largest group promoting the system that operated in the U.S.“, the SEC described. The founders last lived in Russia, the Republic of Georgia and Indonesia.

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The financial watchdog explained that Vladimir Okhotnikov, Jane Doe (aka Lola Ferrari), Mikhail Sergeev and Sergey Maslakov launched in January 2020 to allow retail investors to enter into transactions via smart contracts on the Ethereum, Tron and Binance blockchains.

However, Forsage investors have made a profit by recruiting others to the system, the SEC said, noting that “Forsage also allegedly used the assets of new investors to pay off previous investors in a typical Ponzi scheme.

Carolyn Welshhans, acting head of the SEC’s Crypto Assets and Cyber Unit, commented:

As alleged in the complaint, Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors.

Some regulators have attempted to prevent Forsage from operating in their jurisdictions. The Securities and Exchange Commission of the Philippines initiated cease-and-desist actions against Forsage in September 2020, and the Montana Securities and Insurance Commissioner took action against the scheme in March 2021. However, Forsage continued to operate, denying the allegations in YouTube videos.

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The SEC charged the defendants “of violating the registration and antifraud provisions of the federal securities laws“, the regulator noted, adding that it “is seeking injunctive relief, disgorgement and civil penalties.

Two of the charged developers have already agreed to settle the charges without admitting or denying the allegations. They will have to pay restitution and civil penalties. Both settlements are subject to court approval.

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