According to the U.S. Securities and Exchange Commission (SEC), eleven individuals who ran and marketed the cryptocurrency company Forsage stand accused of running a Ponzi scheme that generated more than $300 million from millions of investors in the U.S. and abroad.Â
The Forsage executives posted videos on their website, promising investors massive profits. One of the executives referred to it as a powerful long-term source of passive income.Â
Securities regulators contend that the service’s creators ran a pyramid scam where investors profited by enlisting new members rather than offering an investment plan. A classic Ponzi scheme is one in which younger customers’ investments are used to pay out earlier investors.Â
The accusations, as well as the steep price decline that cryptocurrencies have seen this year, highlight the financial perils of a sector that has attracted its fair share of scammers and fraudsters. In the instance of Forsage, the service was developed in 2020 with a focus on attracting retail investors who wanted to conduct cryptocurrency transactions using supposed “smart contracts” that functioned on the Ethereum, Tron, and Binance blockchains.Â
The SEC contends that the program operated more like a pyramid scheme, with participants earning money by referring new service users.Â
In addition to the four founders who were charged with running the Ponzi scheme, the SEC also charged three American promoters hired by Forsage to advertise the service, as well as several members of the Crypto Crusaders, a promotional group for the service.Â
According to the interim chief of the SEC’s Crypto Assets and Cyber Unit, Carolyn Welshans, “As the complaint alleges, Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors.”Â
The four founders are Mikhail Sergeev, Sergey Maslakov, Jane Doe (popularly known by her pen name Lola Ferrari), and Vladimir Okhotnikov.Â
According to the SEC, the four founders’ most recent locations were Indonesia, the Republic of Georgia, and Russia.
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