By Hamza Fareed Malik
The US Securities and Exchange Commission charged 11 people in a $300m (£254.6m) crypto fraud scheme that spanned multiple countries.
The individuals were charged for being involved in creating and promoting the fraudulent crypto pyramid and Ponzi scheme which was called Forsage. The scheme netted more than £254.6m from millions of retail investors in the US and globally.
These individuals included the four founders of the scheme, last known to be living in multiple countries including Russia and Indonesia, three US-based Forsage promoters, and others who were the biggest promoters of the scheme in the US and part of a group called Crypto Crusaders.
The SEC said the scheme was launched in January 2020 through a website for retail investors to enter into transactions via smart contracts operating on the Ethereum, Tron, and Binance blockchains.
“Forsage allegedly has operated as a pyramid scheme for more than two years, in which investors earned profits by recruiting others into the scheme,” the SEC said in a release. “Forsage also allegedly used assets from new investors to pay earlier investors in a typical Ponzi structure.”
The SEC imposed cease-and-desist actions against Forsage for its fraudulent operations in September 2020 but the scheme continued to be promoted.
“As the complaint alleges, Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors,” Carolyn Welshhans, Acting Chief of the SEC’s Crypto Assets and Cyber Unit, said. “Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.”
Crypto fraud is a cause for concern in the industry, with the SEC and the UK’s Financial Conduct Authority warning against its unregulated nature.
The SEC declined City A.M.’s request for comment beyond its press release.
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