Forsage Indicted By SEC: $300 Million Ponzi Scheme Revealed. The SEC, the Securities and Exchange Commission, has just indicted eleven team members of Forsage, a popular App launched in 2020. The American financial market authority accuses the project of being just a Ponzi scheme of more applied to cryptocurrencies.
They are implicated “for their role in the creation and promotion of Forsage, a fraudulent crypto pyramid and Ponzi system”. The scam would concern several million individual investors for a total amount collected of more than 300 million dollars.
What to know about Forsage
When it launched in early 2020, Forsage marketed itself as the “first decentralized smart-contracts platform for enterprises” . More concretely, it would allow its users to carry out transactions on three blockchains: Ethereum, Binance and Tron.
In June 2020, Forsage was the most used decentralized application on Ethereum . It was consuming so much bandwidth on the channel that gas costs skyrocketed. At the height of its popularity, the platform received over $20 million in one day.
In reality, Forsage is based on a multi-level marketing (MLM) system. It remunerates its users according to the referrals they have obtained . Indeed, they can join the system by paying a registration fee, following a referral by an existing member.
Once the network is integrated, the only objective is to recruit new users. They will also have to pay the amount of the registration fees. The godfather and the members who are above him in the pyramid then shared this sum.
Moreover, there does not seem to be any technical document on which the real utility of the platform would rest.
You can also find on social networks many testimonials from private investors asked to register on Forsage.
Generally, the talk revolves around a crowdfunding platform and a project that will not take off without many investors.
Carolyn Welshhans of the SEC summarizes the facts as follows:
As the complaint alleges, Forsage is a fraudulent pyramid scheme launched at scale and aggressively marketed to investors.
Who are the defendants?
Among those charged are the 4 founding members of Forsage . The SEC quickly identified Valdimir Okhotnikiv, Jane Doe aka Lola Ferrari, Sergey Maslakov and Mikhail Sergeev. Last I heard, they were living in Russia, Indonesia and Georgia.
The other seven defendants, US residents, are believed to be part of a group called the Crypto Crusaders . They are the ones who have contributed the most to the promotion of the system in the United States.
The indicted US promoters “engaged in the unregistered offering and sale of securities of Forsage. By working with the founders to promote Forsage in the United States, the promoters participated in a scheme to defraud investors,” the complaint states. She points out that some of the defendants called themselves the "Crypto Crusaders."
Two promoters of this group have already agreed to compensate the victims and settle the civil penalties. However, they have so far neither denied nor admitted the charges.
On the contrary, the Forsage team rejects the complaint . The mode of defense adopted is to put the blame on certain investors. They are the ones who would use their platform for malicious purposes:
"Forsage is a decentralized platform where you can build your team and win together. However, some participants use illicit methods to promote this ideology and present Forsage as an investment opportunity for personal gain."
Drilling regularly in the sights of the financial authorities
This is far from the first time that financial authorities have accused Forsage of being a scam based solely on a Ponzi scheme. Back when it was the most active decentralized application of Ethereum, the Philippine SEC had already issued a formal notice against it.
In April 2021, it was the turn of the securities regulator of the State of Montana to ask Forsage to stop its activities. The CSI Commissioner said at the time about the platform:
"There is no product behind (…) Forsage doesn't even try to hide the fact that it's a pyramid scheme anymore. New members must pay with Ethereum cryptocurrency (ether) to the person above them to move up in this pyramid structure."
It now seems undeniable that Forsage is indeed based on a Ponzi scheme. These scams are common in the cryptocurrency world. Play-to-earn games are regularly singled out. The term “Ponzinomics” has even originated in the crypto space to refer to the business model of a crypto project that depends on the continued investment of new entrants.
Generally, the system collapses when the number of new users no longer covers the withdrawal requests of the first entrants. We can therefore only encourage you once again to remain vigilant when you decide to invest in crypto-currencies.
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