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U.S. SEC Reveals $300M Crypto Pyramid And Ponzi Scheme Scam

The scam ran for over two years and defrauded retail investors worldwide. 

The U.S. Securities and Exchange Commission (SEC) has released a statement in which it unearthed a worldwide crypto scam that robbed retail investors of $300m. 

According to SEC authorities, 11 individuals have been charged with defrauding investors as part of a crypto pyramid and Ponzi scheme via the creation and promotion of the ’Forsage’ website.

Forsage Targeted the Ethereum, Tron and Binance Blockchains

The Forsage website claims to offer a “smart contract crypto earnings program” through which investors could earn by recruiting others into the scheme. Moreover, the website was described as having created the “first-ever fully decentralized matrix marketing that runs solely on the blockchain and is built on Ethereum and Tron smart-contract.”

The fraudulent company operated in at least five U.S. states, and encouraged investors to enter into transactions via smart contracts operated on the Ethereum, Tron, and Binance blockchains.In its report, the SEC found that Forsage had allegedly used the funds injected by new investors to pay earlier investors in a classic Ponzi-style reward structure.

Forsage Scam Discovered in 2020

With the SEC seeking injunctive relief, disgorgement, and civil penalties, it revealed that “despite cease-and-desist actions against Forsage for operating as a fraud in September 2020 by the Securities and Exchange Commission of the Philippines and in March 2021 by the Montana Commissioner of Securities and Insurance, the defendants allegedly continued to promote the scheme while denying the claims in several YouTube videos and by other means.”

Among those charged with the fraud are four of the founders of Forsage, currently residing in Russia, the Republic of Georgia and Indonesia. The list of 11 also includes three U.S.-based promoters. 

Carolyn Welshanns, acting director of the SEC’s crypto assets and cyber unit asserts that the “fraudsters cannot circumvent the federal securities law by focusing their scheme on smart contracts and blockchains.”

On the Flipside

  • Forsage still maintains an accessible website offering “immediate rewards.” A classic red flag.

Why You Should Care

Investors have been encouraged to practice caution, as three U.S.-based influencers were charged with endorsing Forsage across a range of social media platforms. 

Find out more about other high profile fraud cases in the crypto industry below:

South African Based Company Charged With Record $1.7B Bitcoin Fraud By CFTC

Lawsuit Accuses Celsius Network of Fraud

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

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Author

Akriti Seth is a Zurich-based business journalist with over six years experience of being a pharma, finance, state and news reporter. As a correspondent for organisations like Channel NewsAsia and Bloomberg TV India, she covered a wide range of subject matter. Being hands-on with social media and current affairs gives her a unique perspective on fintech and crypto. She also enjoys photography and blogging.