11 individuals charged by SEC over $300 million Crypto Pyramid Scheme

11 people have been charged by the Securities and Exchange Commission (SEC) for allegedly helping to establish the “fraudulent crypto pyramid scheme” platform Forsage.

The SEC filed accusations in an Illinois federal court on Monday, saying that the platform’s creators and promoters used a “fraudulent crypto pyramid and Ponzi scheme” to raise more than $300 million from millions of retail investors worldwide.

In a typical Ponzi structure that included the US and Russia, Forsage was created in a way that permitted investors to make money by recruiting new investors, according to the SEC lawsuit.

The SEC defines a Ponzi scheme as an investment scam that rewards current investors with money raised from new investors. These schemes usually use the promise of investing money in opportunities with large returns and low risk to bring in new investors.

The SEC claimed the following in the court document:

“It had no visible source of revenue other than the money collected from investors throughout the relevant time period and did not sell or represent to sell any genuine, consumable goods to bona fide retail customers. Investors’ main method of profiting from Forsage was through enlisting others as members.”

In order to buy ‘slots’ from Forsage’s smart contract, new investors must first create a crypto-asset wallet, according to the SEC.

Infractions of “Unregistered Offers and Sales of Securities” under sections 5A-C and “Fraud” under sections 17(a) (1&3) of the US Securities Act have been brought against all 11 people. Additionally, the defendants are accused of “Fraud” in violation of US Exchange Act Sections 10B-C.

According to Welshhans, these efforts allowed the Ponzi structure to take advantage of the enormous scale that retail investors’ purchases of the model over the previous two years gave it.