The Securities and Exchange Commission (SEC) charged 11 people for creating and promoting Forsage, a fraudulent crypto pyramid and Ponzi scheme.
The scheme raised more than $300 million from millions of retail investors worldwide, including in the United States. The SEC charged the four founders of Forsage, who were last known to be living in Russia, the Republic of Georgia, and Indonesia. It also charged three U.S.-based promoters who endorsed Forsage on its website and social media platforms, as well as members of the so-called Crypto Crusaders, a promotional group for the scheme that operated in the United States in at least five different states.
Vladimir Okhotnikov, Jane Doe a/k/a Lola Ferrari, Mikhail Sergeev, and Sergey Maslakov launched Forsage.io in January 2020. This website allowed millions of retail investors to enter into transactions via smart contracts operated on the Ethereum, Tron, and Binance blockchains. According to the SEC’s complaint, Forsage allegedly operated as a pyramid scheme for more than two years, in which investors earned profits by recruiting others into the scheme. Forsage also allegedly used assets from new investors to pay earlier investors in a typical Ponzi structure.
Cease-and-desist actions were taken against Forsage in September 2020 by the Securities and Exchange Commission of the Philippines and in March 2021 by the Montana Commissioner of Securities and Insurance. However, the defendants allegedly continued to promote the scheme while denying the claims in several YouTube videos and other means.
“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.”
Along with the founders, the SEC charged Cheri Beth Bowen, of Pelahatchie, Miss.; Ronald R. Deering, of Coeur d’ Alene, Idaho; Samuel D. Ellis, of Louisville, Ky.; Mark F. Hamlin, of Henrico, Va.; Carlos L. Martinez, of Chicago, Ill.; Alisha R. Shepperd, of Dunedin, Fla.; and Sarah L. Theissen, of Hartford, Wis., with violating the registration and anti-fraud provisions of the federal securities laws.
The SEC is seeking injunctive relief, disgorgement, and civil penalties.
Without admitting or denying the allegations, two of the defendants, Ellis and Theissen, agreed to settle the charges and to be permanently enjoined from future violations of the charged provisions and certain other activity. Further, Ellis agreed to pay disgorgement and civil penalties, and Theissen will be required to pay disgorgement and civil penalties as determined by the court.