On Monday, the Securities and Exchange Commission (SEC) accused 11 individuals of creating and promoting Forsage, a crypto pyramid and Ponzi scheme that raised more than $300 million from millions of retail investors worldwide, including in the United States. The accompanying press release noted that while two have settled, the rest could be on the hook for civil penalties and the disgorgement of ill-gotten profits.
The Northern District of Illinois complaint explains that since 2020, four founders, Vladimir Okhotnikov, Lola Ferrari, Mikhail Sergeev, and Sergey Maslakov launched Forsage.io, a website that allowed retail investors to enter into smart contracts that operated on the Ethereum, Tron, and Binance blockchains. The platform described itself as an “international community of the global decentralized ecosystem and the first ever smart contract marketing matrix of the Ethereum and Tron networks,” the complaint said.
Investors participated in Forsage by purchasing “slots” in a smart contract, purportedly giving them certain rights to future compensation. Money could be earned in one of two ways: by selling one or more slots to someone else, or via “profit sharing in spillover payments from other investors in the larger Forsage network.”
In collaboration with other promoters, including several members of the so-called Crypto Crusaders, the largest promotional group for the scheme that operated in the United States, the defendants used social media to aggressively promote Forsage.
Yet, according to the SEC, “Forsage is a textbook pyramid and Ponzi scheme… [with] all payouts to earlier investors were made using funds received from later investors.” Despite cease-and-desist orders against Forsage in September 2020 by the SEC’s Filipino counterpart and later by a Montana state agency, the defendants continued to promote the scheme while denying the claims in several YouTube videos and by other means, the complaint said.
The SEC charged the defendants with offering and selling unregistered securities and multiple fraud provision violations. While some defendants are based in the United States, the four founders were last known to be living in Russia, the Republic of Georgia, and Indonesia.