The Securities and Exchange Commission (SEC) has charged 11 individuals for their roles in creating and promoting Forsage, an alleged fraudulent crypto pyramid and Ponzi scheme that raised more than $300m (£246m, €293m) from millions of retail investors worldwide.
Those charged include the four founders of Forsage, who were last known to be living in Russia, the Republic of Georgia and Indonesia, as well as three US-based promoters engaged by the founders to endorse Forsage on its website and social media platforms, and several members of the promotional group for the scheme Crypto Crusaders.
The individuals charged are:
- Vladimir Okhotnikov;
- Jane Doe (also known as Lola Ferrari);
- Mikhail Sergeev;
- Sergey Maslako;
- Samuel Ellis;
- Mark Hamlin;
- Sarah Theissen;
- Carlos Martinez;
- Ronald Deering;
- Cheri Beth Bowen; and
- Alisha Shepperd.
Pyramid-Ponzi hybrid
According to the SEC’s complaint, in January 2020, Okhotnikov, Ferrari, Sergeev, and Maslakov launched Forsage, a website that allowed millions of retail investors to enter into transactions via smart contracts that operated on the Ethereum, Tron, and Binance blockchains.
But Forsage allegedly has 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, the SEC said.
Despite cease-and-desist actions against Forsage for operating as a fraud in September 2020 by the Securities and Exchange Commission of the Philippines, and in March 2021 by the Montana Commissioner of Securities and Insurance, the defendants allegedly continued to promote the scheme while denying the claims in several YouTube videos and by other means.
Carolyn Welshhans, acting chief of the SEC’s crypto assets and cyber unit, said: “As the complaint alleges, 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.”
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.
Additionally, Ellis agreed to pay disgorgement and civil penalties, and Theissen will be required to pay disgorgement and civil penalties as determined by the court. Both settlements are subject to court approval.
