The U.S. Securities and Exchange Commission (SEC) has charged 11 individuals for their roles in an alleged crypto Ponzi scheme that may have taken as much as $300 million from investors.
A Crypto Ponzi Scheme Has Been Shut Down
The Ponzi scheme – which operated under the name Forsage – had been in operation for more than two years at the time the charges were filed. The founders – along with several individuals that had been hired as promoters – were then thoroughly investigated by law enforcement agents.
Launched in January of 2020, Forsage explained via its website that it was in the business of giving retail investors crypto opportunities they otherwise wouldn’t have access to. Site copy claimed that the organization sought to provide investors chances to take part in smart contract transactions that occurred on the Ethereum, TRON, and Binance blockchains. Investors could earn money through the company’s referral program granting those they tried to bring on signed up for new accounts.
Like any typical Ponzi scheme, Forsage is believed to have utilized new investor funds to pay off old players under the guise that they were earning returns and profits. Carolyn Welshhans – acting chief of the SEC’s crypto assets and cyber unit – explained in a recent interview:
Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors. Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.
Participants or promoters of the company are believed to be hiding out in nations like Georgia, Indonesia, and Russia at the time of writing. Several of the accused have not come forward, though three individuals – without denying or admitting guilt – have stated that they will settle with the SEC and pay penalty fees related to the charges.
Crypto schemes like this have become quite common in recent years. Earlier today, Live Bitcoin News published a similar article talking about two individuals based in Orange County, California, that were sentenced to two and three years respectively in prison for their roles in a crypto scam that stole nearly $2 million from investors.
Why Does This Happen So Often?
Both men lured investors under the guise that by purchasing their DROP token, they would gain access to Dex, a special algorithmic trading bot that would lead them to great fortune and financial returns. In truth, Dex was nowhere near as profitable as the men claimed, and most of investors’ money was utilized to make payments either to the two founders or to their business associates.
When arrested and charged, both culprits – according to federal prosecutors – showed great remorse for their actions and accepted their fates with little fight. It was alleged in court documents that they were simply excited to be part of the growing crypto industry and didn’t consider the consequences of their actions.