Ben Strack

<div id="highlights-block_62e8002ef0dbd" class="highlights">
 <ul>
 <li>Founders of the alleged scheme were last known to be living in Russia, Indonesia and the Republic of Georgia </li>
 <li>Fraudsters cannot circumvent securities laws by focusing their schemes on smart contracts and blockchains, SEC official says</li>
 </ul>
 
</div>



The SEC has charged 11 people for allegedly creating and promoting a fraudulent crypto pyramid and Ponzi scheme that raised more than $300 million from retail investors.



Forsage launched in January 2020 and claimed to allow investors to enter into lucrative deals powered by smart contracts that operated on the Ethereum, Tron and Binance blockchains, according to the SEC.&nbsp;



But, the agency <a href="https://www.sec.gov/news/press-release/2022-134?utm_medium=email&amp;utm_source=govdelivery" target="_blank" rel="noreferrer noopener">said in a Monday statement</a> that investors earned profits by recruiting others into the scheme. Forsage also allegedly used assets from new investors to pay earlier investors — the hallmark of a Ponzi scheme.



The SEC&#8217;s complaint charges Forsage founders Vladimir Okhotnikov, Lola Ferrari, Mikhail Sergeev and Sergey Maslakov, who were last known to be living in Russia, the Republic of Georgia and Indonesia. It also charges three US-based promoters tasked with endorsing the platform on its website and social media, as well as several members of a group called Crypto Crusaders — a unit operating out of five different states that advertised the scheme.&nbsp;



&#8220;As the complaint alleges, Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors,&#8221; Carolyn Welshhans, acting chief of the SEC’s crypto assets and cyber unit, said in a statement. &#8220;Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.&#8221;



The <a href="https://www.sec.gov.ph/pr-2020/sec-issues-cease-and-desist-order-against-forsage/" target="_blank" rel="noreferrer noopener">SEC of the Philippines</a> issued a cease-and-desist action against Forsage in September 2020, as did the <a href="https://csimt.gov/news/commissioner-downing-orders-forsage-to-cease-and-desist/" target="_blank" rel="noreferrer noopener">Montana Commissioner of Securities and Insurance</a> in March 2021. But the defendants denied the claims in YouTube videos and allegedly continued the scheme, according to the SEC.



Forsage&#8217;s YouTube <a href="https://www.youtube.com/c/FORSAGECommunity" target="_blank" rel="noreferrer noopener">channel</a>, which is still online, claims that its users have generated &#8220;700,000 in Ethereum&#8221; and &#8220;1,700,000 in TRON&#8221; and $57 million in stablecoin binance USD. A video promising &#8220;a new launch&#8221; was published 10 days ago.



<figure class="wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" title="New Launch Coming Soon" width="1024" height="576" src="https://www.youtube.com/embed/0nEz4eAmj6U?feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>
</div></figure>



The SEC’s complaint seeks injunctive relief, disgorgement and civil penalties.



Two of the defendants, Kentucky resident Samuel Ellis and Wisconsin resident Sarah Theissen, agreed to settle the charges. Ellis agreed to pay disgorgement and civil penalties, according to the SEC, while Theissen will be required to pay disgorgement and civil penalties.



Regulators have so far been busy targeting crypto-related fraud this year. The Commodity Futures Trading Commission (CFTC) <a href="https://cms.blockworks.co/cftc-charges-4-in-crypto-ponzi-scheme-as-questions-swirl-over-jurisdiction/" target="_blank" rel="noreferrer noopener">charged four individuals in March</a> with fraud surrounding an alleged crypto Ponzi scheme that raised more than $44 million of bitcoin.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/thebreakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forwardguidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha directly in your inbox.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/supplyshock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>