Forsage Founders Indicted in $340M DeFi Ponzi Scheme

Four Russian nationals allegedly coded smart contracts in a way that they would automatically shuffle investor funds between different accounts.

People walking in a desert towards a huge purple panther.
  • U.S. Department of Justice charged four Russian individuals for running a Ponzi scheme through a platform called Forsage.
  • The defendants allegedly used computer code to steal customers’ money.
  • The defendants face up to 20 years in prison if found guilty.

Law enforcement agencies in the United States continue to crack down on crypto scammers. A federal grand jury in the District of Oregon indicted four founders for running a Ponzi scheme that masqueraded as a decentralized finance (DeFi) platform.

According to a statement by the U.S. Department of Justice, four Russians, Vladimir Okhotnikov, Olena Oblamska, Mikhail Sergeev, and Sergey Maslakov, are responsible for running a “global Ponzi and pyramid investment scheme” through a company called Forsage.

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The DOJ alleges that the defendants coded and deployed smart contracts on Ethereum (ETH), Binance Smart Chain (BNB), and Tron (TRON) blockchains to shuffle around investors’ funds instead of investing them. The defendants marketed the scheme as a legitimate, low-risk, and lucrative investment opportunity.

On top of that, the DOJ alleges that the defendants coded at least one of Forsage’s accounts in a way that transferred investors’ deposits to accounts controlled by the founders. This significantly impacted the investors as over 80% received less ETH than initially deposited, and 50% never received a single payout. In total, the scheme took in around $340 million.

Assistant Attorney General Kenneth A. Polite, Jr. of the DOJ’s Criminal Division said this case shows that the DOJ can use blockchain analytics to uncover crypto scams.

“Together with our partners, the department is committed to holding accountable fraudsters who cheat investors, including in the emerging DeFi space. Today’s indictment showcases the department’s ability to use all available investigative tools, including blockchain analysis, to uncover sophisticated frauds involving cryptocurrency and digital assets.”

The four Forsage founders have been charged with conspiracy to commit wire fraud. If found guilty, the defendants face up to 20 years in prison.

On the Flipside

  • How much investors lost and whether investigators can return their money is unknown.

Why You Should Care

The indictment of Forsage founders shows that crypto scams are everywhere and in all forms. Investors should always do their own research before making financial and investment decisions, especially if the opportunity sounds too good to be true.

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Read more about law enforcement actions against crypto scammers in the U.S.: 

Crypto Twitter Makes Fun of DOJ’s ‘Major Action’ Against Obscure Russian Exchange Bitzlato

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Arturas Skur

Arturas Skur is a cryptocurrency news reporter at DailyCoin who covers Web 3.0 domains, DeFi, and Ethereum Layer-2s. With over five years of experience in journalism and public relations, Arturas brings his critical thinking and analytical abilities to deliver insightful news stories. In his free time, he enjoys hiking, playing with his dog, and reading.