Forsage allows millions of ordinary investors to use ethereum, tron, and binance smart contracts.
On Monday, the Securities and Exchange Commission filed a civil complaint against 11 people for their roles in creating and promoting a crypto-focused pyramid scheme that allegedly scammed investors out of more than $300 million.
The scheme, called Forsage, said it was a decentralised smart contract platform, and it let millions of small investors do business through smart contracts that ran on the ethereum, tron, and binance blockchains.
But the SEC says that under the hood, the operation worked like a typical pyramid scheme for more than two years, with investors making money by getting other people to join.
Wall Street’s top watchdog, the SEC, calls Forsage a “textbook pyramid and Ponzi scheme” in its formal complaint. Forsage aggressively promoted its smart contracts through online ads and new investment platforms, but it never sold “any actual, consumable product.”
The complaint also says that “the main way investors made money with Forsage was by getting other people to join the scheme.”
In a statement, the SEC also said that Forsage had a typical Ponzi structure, in which assets from new investors were used to pay off older investors.
Carolyn Welshhans, acting head of the SEC’s Crypto Assets and Cyber Unit, wrote: “The complaint says that Forsage is a fraudulent pyramid scheme that was launched on a large scale and aggressively marketed to investors.”
“Fraudsters can’t get around the federal securities laws by using smart contracts and blockchains in their schemes.”
Forsage’s support platform didn’t offer a way to get in touch with the company and didn’t say anything.
The SEC has charged eleven people, and four of them are the founders of Forsage. No one knows where they are now, but the last time anyone saw them, they were in Russia, Georgia, and Indonesia.
The SEC has also brought charges against three U.S. promoters who backed Forsage on their social media accounts. They were not named in the report from the commission.
Since it came out in January 2020, regulators from around the world have tried several times to shut it down. In September 2020, the Securities and Exchange Commission of the Philippines told Forsage to stop what he was doing. In March 2021, the Montana commissioner of securities and insurance did the same.
Even so, the defendants allegedly kept promoting the scheme, even though they denied the claims in a number of YouTube videos and other ways.
Two of the defendants agreed to settle the charges, but only if the court agreed. Neither of them admitted or denied the charges.