Blockchain networking platform Forsage has used a pyramid scheme to cheat investors out of around $300 million, with victims of the fraudulent scheme residing in countries across the globe.
The US authorities have had their eye on the company for some time and managed to bring an end to the cryptocurrency pyramid scheme, charging 11 people for various roles in defrauding retail investors.
The scheme went on for more than two years; during that period, the company established itself as a legitimate company drawing in investors to invest large sums of money. However, the US Securities and Exchange Commission (SEC) announced the charges on Monday, detailing the various roles members of the Ponzi scheme held.
The founders of Forsage were charged by the agency and various promoters involved in drawing in new investors. According to the SEC, the company website first went online in January 2020, at the height of the crypto-craze, offering millions of retail investors the opportunity to complete transactions using smart contracts.
The smart contracts were built on major networks like Ethereum (ETH), Tron (TRON), and Binance (BNB), legitimising the company and offering a false reality to investors. Another draw of the scheme was the pyramid design, which was worked by rewarding investors for recruiting others into the scheme.
What Have The SEC Said?
The SEC commented that much like a typical Ponzi scheme, Forsage operated by using new funds invested to pay earlier investors and keep up the illusion that the company was offering a legitimate investment product.
Carolyn Welshhands, the acting chief of the SEC’s Crypto Assets and Cyber unit, said, “Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors,” she went on to say that “Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.”
Little detail about the fraudsters has been released, though the SEC commented that the founders were last known to live in Russia, Georgia, and Indonesia. Surprisingly, the SEC stated that without admitting or denying the allegations, two defendants agreed to settle the charges, and one even agreed to pay the penalties.