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11 people charged in a “massive” Ponzi pyramid scheme

The US securities watchdog charged 11 individuals for the creation and promotion of Forsage – a fraudulent crypto pyramid and Ponzi scheme which raised over $300 million.

The Securities and Exchange Commission (SEC) charged those directly involved in the scheme, including four founders living in Russia, the Republic of Georgia, and Indonesia; three U.S.-based promoters; and members of the so-called Crypto Crusaders, which promoted the scheme that operated in the United States.

Forsage was launched in January 2020, providing retailers access to transactions via smart contracts – a computer program that automates the process of crypto trading. It operated on the Ethereum, Tron, and Binance blockchains.

Following the classic Ponzi scheme, the company used assets from new investors to pay earlier investors who made a profit by recruiting new people.

“Forsage is a textbook pyramid and Ponzi scheme…The primary way for investors to make money from Forsage was to recruit others into the scheme,” the SEC's lawsuit explained.

As a result, the scheme managed to raise over $300 million through an unregistered securities offering.

"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. "Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains."

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