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The US SEC notes that Forsage was running a standard pyramid scheme and earned profits by recruiting others.
On Monday, August 1, the US Securities and Exchange Commission (SEC) filed a civil complaint accusing 11 people of their roles in promoting a fraudulent crypto Ponzi scheme.
Dubbed Forsage, the scheme claimed to be a decentralized smart contract platform that would allow retail investors to enter into transactions through smart contracts running on the Ethereum, Tron, and Binance blockchains.
But the SEC alleges that Forsage functioned as a standard pyramid scheme for more than two years. It adds that investors in Forsage earned profits by recruiting others. As per the formal complaint registered by the SEC, it refers to Forsage as a “textbook pyramid and Ponzi scheme”.
Running this scheme, Forsage allegedly raised more than $300 million from retail investors in an illicit way. The agency has charged four founders of Forsage along with a series of people running this scheme. These founders are part of the promotional group Crypto Crusaders, an alleged scheme that operated in five US States.
Understanding the Nature of the Scheme
Via online promotions and new investment platforms, Forsage was aggressively promoting its smart contracts. However, during its promotions, Forsage didn’t sell “any actual, consumable products”. As per the SEC’s complaint, the “primary way for investors to make money from Forsage was to recruit others into the scheme”.
The SEC accused Forsage of operating a typical Ponzi structure wherein it would use assets from new investors and pay to earlier ones. Carolyn Welshhans, acting chief of the SEC’s Crypto Assets and Cyber Unit wrote:
“As the complaint alleges, Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors. Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.”
As per reports, the last whereabouts of the four Forsage founders are currently unknown. Reportedly, they were last living in Russia, the Republic of Georgia and Indonesia. Besides, the SEC has also charged three US-based promoters for endorsing Forsage on their social media platforms.
Launched back in January 2020, regulators from across the world tried to shut down Forsage a couple of times. The SEC of the Philippines issued a cease-and-desist order on Forsage in September 2020.
The Forsage website claims to have brought over 2 million participants. It also adds that it has delivered over $1.35 billion in value since the website launch.