SEC Charges 11 People over USD 300M Crypto 'Pyramid Scheme'

Source: AdobeStock / Andriy Blokhin

 

The US Securities and Exchange Commission (SEC) has charged 11 individuals for their roles in an alleged crypto pyramid and Ponzi scheme that raised over USD 300m from millions of investors worldwide, including in the United States.

The watchdog filed a civil complaint on Monday against blockchain networking platform Forsage, which claimed to be a decentralized smart contract platform allowing investors to enter into transactions via smart contracts that operated on the Ethereum (ETH), Tron (TRX), and BNB Smart Chain blockchains.

According to the SEC, Forsage functioned like a standard pyramid scheme for more than two years, allowing investors to earn profits by bringing others into the operation.

In its formal complaint, the SEC also said that the company was a “textbook pyramid and Ponzi scheme,” which did not sell “any actual, consumable product,” and that “the primary way for investors to make money from Forsage was to recruit others into the scheme.”

“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.”

The SEC detailed that those charged include the company's four founders, whose whereabouts are currently unknown and were last known to be living in Russia, the Republic of Georgia, and Indonesia.

Three US-based promoters, as well as several members of the so-called Crypto Crusaders, the largest promotional group for the scheme that operated in the United States from at least five different states, were also charged.

Launched in early 2020, Forsage has reportedly received several cease-and-desist orders from regulators around the globe. In September 2020, the Securities and Exchange Commission of the Philippines and in March 2021, the Montana Commissioner of Securities and Insurance in the US ordered the startup to stop operations.

Despite this, the defendants "allegedly continued to promote the scheme while denying the claims in several YouTube videos and by other means."

Samuel D. Ellis, a self-proclaimed "cryptocurrency mindset coach," and Sarah L. Theissen, who were among those charged, have agreed to settle the charges, subject to court approval.

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