US Indicts Four Co-Founders of $340M Forsage Ponzi Scheme

The United States authorities have charged four co-founders of the cryptocurrency Ponzi scheme Forsage, which raised around $340 million by running the decentralized finance (DeFi) investment platform.

Forsage C-Founders Face Charges

Announced on Wednesday, the indictment brought by a federal grand jury in the District of Oregon named four Russian nationals: Vladimir Okhotnikov, Olena Oblamska, Mikhail Sergeev, and Sergey Maslakov. They promoted Forsage as a legitimate system with “low-risk and lucrative investment opportunity” on social media, but in reality, it was a fraudulent scheme.

They were charged with conspiracy to commit wire fraud, which contains a maximum prison sentence of 20 years.

The court documents detailed that the four defendants coded and deployed smart contracts with malicious codes that systemized the process of transferring the funds deposited by new investors to the existing ones, making it a classic Ponzi scheme. They even combined the Pyramid scheme on three blockchains: Ethereum, Binance Smart Chain, and Tron.

“While advancements in the virtual asset ecosystem bring new opportunities to investors, criminals are also finding new ways to orchestrate illicit schemes,” said Luis Quesada, the Assistant Director of the FBI’s Criminal Investigative Division.

Blockchain analysts confirmed that over 80 percent of Forsage investors received less Ethereum than they invested in the scheme, while over 50 percent never received a single payout. Further, at least one account on the Ethereum smart contract controlled by the scheme founders siphoned investors’ funds out of the Forsage investment network.

Several Agencies Bust the Forsage Scheme

The latest indictment came after the US Securities and Exchange Commission (SEC) charged 11 individuals connected to the Forsage scheme, including the four co-founders named in the latest lawsuit, for running the fraudulent Ponzi scheme.

Forsage operated for more than two years and even paid members to recruit others into the scheme. The scheme faced its first cease-and-desist order in July 2020 by the securities market regulator in the Philippines, which labeled it as a Ponzi scheme. The US State of Montana also issued a cease-and-desist order against the scheme in 2021, but Forsage founders kept denying the charges on YouTube videos.

“Bringing charges against foreign actors who used new technology to commit fraud in an emerging financial market is a complicated endeavor only possible with the full and complete coordination of multiple law enforcement agencies,” said US Attorney Natalie Wight for the District of Oregon.

Regulators around the world are busting Ponzi and other fraudulent schemes that are defrauding investors. Recently, the former director of a $180 million FX Ponzi scheme Courtenay House is facing jail time of up to 10 years in Australia after a guilty plea, along with a heavy monetary penalty.