US SEC Charges 4 Co-founders, 7 Others in $300M Crypto Pyramid Scheme

The United States Securities and Exchange Commission (SEC) has charged 11 individuals before the United States District Court in the Northern District of Illinois for alleged fraud.

Four of these 11 individuals were the Co-Founders of Forsage, a project the SEC described as a “fraudulent crypto pyramid and ponzi scheme.”

The SEC noted that the 11 individuals raised over $300 million from retail investors from around the world through the scheme.

The US securities market regulator disclosed these on Monday in a press statement published on its website.

Carolyn Welshhans, the acting Chief of the SEC’s Crypto Assets and Cyber Unit, noted that Forsage was “launched on a massive scale."

Welshhans added that the scheme was "aggressively marketed to investors.”

In addition, the SEC noted that the four founders of the scheme were last known to be residing in Russia, the Republic of Georgia and Indonesia.

The watchdog further disclosed that three of the charged 11 individuals were promoters based in the United States.

These promoters were paid by the founders to give endorsement to 'the fraudulent blockchain scheme' on its website and social media platforms.

Other persons charged were members of a promotional group called Crypto Crusade, the SEC said.

This self-styled Crypto Crusade operated from at least five different states in the US, the SEC explained.

The watchdog added that the platform was the biggest promotional group for the pyramid scheme.

The Background

According to the SEC, in January 2020, the four founders, Vladimir Okhotnikov, Jane Doe or Lola Ferrari, Mikhail Sergeev and Sergey Maslakov, inaugurated Forsage.

Forsage.io functioned as a website that enabled millions of retail investors to initiate transactions using smart contracts run on Blockchains, such as Ethereum and Binance.

The SEC also alleged that Forsage for over two years ran a pyramid scheme that paid members for recruiting others into the circle.

According to the press statement, the Philippine SEC issued a cease-and-desist to Forsage in September 2020.

On top of that, the Montana Commissioner of Securities and Insurance issued another in March 2021 to deaf ears, the SEC said.

Instead, the watchdog pointed out Forsage remained floated even as its founders kept denying the claims through multiple YouTube videos.

"Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains,” Welshhans said.

The SEC asked that the court grant “injunctive relief, disgorgement and civil penalties” against Forsage.io.

Other than the four founders, the SEC said it charged the following persons with violation of the registration and anti-fraud provisions of the federal securities laws: Cheri Bowon (Missipi), Ronald Deering (Idaho), Samuel Ellis (Louisville) and Mark Hamlin (Henricho).

Others are Carlos Martinez (Chicago), Alisa Shepherd (Florida), Sarah Theissen (Wisconsin) and Sarah Theissen (Winconsin).

The SEC explained: “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 activities.

“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."