Yet another cryptocurrency operation has been accused of defrauding its customers. This time, the US Securities and Exchange Commission claims that crypto trading platform Forsage.io (opens in new tab) has performed a “textbook pyramid and Ponzi scheme”. The agency has charged 11 people in a complaint (opens in new tab) submitted earlier today. Without admitting or denying guilt, two of the accused intend to reach a settlement.
Reached through the support chatline for comment, a Forsage representative told Tech With Brains that the SEC’s allegations are “nonsense of cryptocurrency newcomers” and “untrue”.
The SEC alleges that Forsage, which allows users to transact on the Ethereum, Tron, and Binance blockchains, has run a pyramid scheme where investors make money by recruiting others to the platform. It also claims that the money from new investors has been used to pay older investors, a classic Ponzi scheme.
Forsage.io reportedly partnered with a group called the “Crypto Crusaders” to promote its services and attract new investors.
The Montana SEC sent the company termination notices in 2021. Forsage denied the allegations on YouTube and social media (in posts it has since deleted) and continued to operate.
“Forsage is not trying to hide that they are a pyramid scheme. Members must pay with Ethereum cryptocurrency to the person above them to buy a position on the pyramid,” the Montana SEC said in its 2021 statement. also sent cancellation notices to Forsage in 2020.
Nearly two weeks ago, the Forsage YouTube page posted a video about an upcoming relaunch that promises to break “new records” and make “new crypto millionaires”, with images of yachts and people celebrating their winnings.
The SEC’s Crypto Assets and Cyber Unit has recently been in the news for indicting multiple people in the first-ever crypto insider trading just a few weeks ago.
“Scammers cannot get around federal securities laws by targeting their schemes on smart contracts and blockchains,” said Carolyn Welshhans, acting head of the SEC’s Crypto Assets and Cyber Unit.
Those charged in the Forsage case include people from Russia, Indonesia, the Republic of Georgia and the United States. Two of the Americans indicted have agreed to settle the charges pending court approval, but the settlement does not constitute an acknowledgment or denial of the charges.