Charges filed over $300m ‘textbook Ponzi scheme’ • The Register

Charges filed over $300m ‘textbook Ponzi scheme’ • The Register


Forsage, an alleged crypto Ponzi scheme purporting to be a decentralized smart contract platform, bilked millions of investors worldwide out of more than $300 million, according to America’s securities watchdog.

On Monday, the SEC charged 11 people for their roles in the alleged blockchain scheme that spanned the US, Russia, the Philippines, and other countries. 

It’s the latest in a string of enforcement actions as the SEC and US Department of Justice crack down on those using the promise of cryptocurrency riches to cheat victims out of millions of dollars.

It is said that Forsage launched in January 2020 with a website that allowed investors to send money via smart contracts on the Ethereum, Tron, and Binance blockchains. These transactions totaled more than $300 million, according to the SEC.

However, like any other pyramid scheme, the primary way that investors made money from Forsage was to recruit other investors, according to the watchdog. As the SEC’s lawsuit [PDF] noted: “Forsage is a textbook pyramid and Ponzi scheme.” 

“As the complaint alleges, Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors,” said Carolyn Welshhans, acting chief of the SEC’s Crypto Assets and Cyber Unit, in a statement. “Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.”

To get in on the multi-level marketing scheme, according to the regulator, a Forsage investor created a crypto wallet and then bought “slots,” which allowed them to earn money off of others recruited into the scheme, called “downlines.”

“When an investor purchased a slot, a portion of that investment was directed to the persons who recruited the investor (the ‘uplines’) and the investor in turn became an upline to whomever the investor recruited,” according to the court documents. “Thus, all payouts to earlier investors were made using funds received from later investors.”

Despite cease-and-desist actions against Forsage by the Securities and Exchange Commission of the Philippines in September 2020 and Montana Commissioner of Securities and Insurance in the US in March 2021, Forsage’s founders and others continued to promote the fraud on YouTube and social media channels and draw millions of users to the website, the SEC claimed.

The individuals charged include the four Forsage founders — Vladimir Okhotnikov, Jane Doe aka Lola Ferrari, Mikhail Sergeev, and Sergey Maslakov —  along with US-based promoters so-called Crypto Crusaders. Most of them have participated in other multi-level marketing schemes, according to the court documents.

Okhotnikov, a Russian national thought to reside in the Republic of Georgia, served as “the face” of the operation and one of its lead promoters on YouTube videos. 

Fellow co-founder Ferrari, whose actual identity is unknown but calls herself “Lola Ferrari,” is believed to be a Russian national residing in Bali, Indonesia, according to the SEC. She’s the self-proclaimed “goddess” of Forsage.

Additionally, co-founder Sergeev, also known as “Mike Mooney,” “Gleb,” and “Gleb Million,” is thought to live in Moscow. He appeared in promotional interviews as the company’s “development director.”

Finally, Maslakov, believed to reside in Moscow or Gelendzhik, Russia, is the fourth co-founder who also appeared in promo videos for the scam, according to the SEC.

In addition to charging the four founders, the lawsuit charges Cheri Beth Bowen, of Pelahatchie, Mississippi; Ronald R. Deering, of Coeur d’ Alene, Idaho; Samuel D. Ellis, of Louisville, Kentucky; Mark F. Hamlin, of Henrico, Virginia; Carlos L. Martinez, of Chicago, Illinois; Alisha R. Shepperd, of Dunedin, Florida; and Sarah L. Theissen, of Hartford, Wisconsin, with violating the registration and anti-fraud provisions of the federal securities laws. 

Two of the defendants, Ellis and Theissen, agreed to settle the charges. Ellis agreed to pay disgorgement and civil penalties, and Theissen will pay disgorgement and civil penalties as determined by the court. Both settlements are subject to court approval. ®

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