SEC Charges 11 People in $300 Million Forsage Crypto Pyramid and Ponzi Scheme

The U.S. Securities and Exchange Commission (SEC) has charged four founders and seven promoters of Forsage, which it described as “a fraudulent crypto pyramid and Ponzi scheme.” The scheme allegedly raised more than $300 million from millions of retail investors worldwide, including in the U.S.

SEC Takes Action Against Forsage Crypto Scheme

The U.S. Securities and Exchange Commission (SEC) announced Monday that it has “charged 11 individuals for their roles in creating and promoting Forsage, a fraudulent crypto pyramid and Ponzi scheme.” The securities regulator explained that the Forsage scheme raised more than $300 million from millions of retail investors worldwide, including in the U.S.

The 11 defendants are four Forsage founders, three U.S.-based promoters of the scheme, and “several members of the so-called Crypto Crusaders — the largest promotional group for the scheme that operated in the United States,” the SEC described. The founders were last known to be living in Russia, the Republic of Georgia, and Indonesia.

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

However, Forsage investors earned profits by recruiting others into the scheme, the SEC said, noting that “Forsage also allegedly used assets from new investors to pay earlier investors in a typical Ponzi structure.”

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

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

Some regulators have tried to stop Forsage from operating in their jurisdictions. The Securities and Exchange Commission of the Philippines launched cease-and-desist actions against Forsage in September 2020 and the Montana Commissioner of Securities and Insurance took action against the scheme in March 2021. However, Forsage continued its operations, denying the allegations in Youtube videos.

The SEC charged the defendants “with violating the registration and anti-fraud provisions of the federal securities laws,” the regulator noted, adding that it “seeks injunctive relief, disgorgement, and civil penalties.”

Two of the promoters charged already agreed to settle the charges without admitting or denying the allegations. They will be required to pay disgorgement and civil penalties. Both settlements are subject to court approval.