August 3, 2022: -On Monday, the Securities and Exchange Commission filed a civil complaint that seized 11 people for their roles in creating and promoting an allegedly fraudulent crypto-focused pyramid scheme that raised over $300 million from investors.
The scheme, called Forsage, claimed to be a decentralized innovative contract platform, permitting millions of retail investors to enter into transactions through smart contracts that operated on the ethereum, Tron, and Binance blockchains. But under the hood, the SEC alleges that for over two years, the setup functioned such as a classic pyramid scheme, in which investors earned profits by recruiting different into the operation.
In the SEC’s formal complaint, the top watchdog calls Forsage a “textbook pyramid and Ponzi scheme,” in which Forsage aggressively promoted its smart contracts through online promotions and recent investment platforms while not selling “any actual, consumable product.” The complaint goes on to say that “the primary way for investors to make money from Forsage was to recruit into the scheme.”
In a statement, the SEC added that Forsage operated a typical Ponzi structure, wherein it allegedly operated new investors’ assets to pay earlier.
“As the protest alleges, Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors,” wrote Carolyn Welshhans, which acted as chief of the SEC’s Crypto Assets and Cyber Unit.
“Fraudsters cannot circumvent the national securities laws which focus their schemes on smart contracts and blockchains.”
Four of the eleven individuals charged by the SEC are founders of Forsage. Their current whereabouts are unknown, but they were last known to live in Russia, the Republic of Georgia, and Indonesia.
The SEC has also charged three U.S.-based promoters who endorsed Forsage on their social media platforms. They were not named in the commission’s release.
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