SEC charges 11 people for running a crypto Ponzi scheme that raised $300 million from retail investors worldwide

• The US Securities and Exchange Commission charged 11 people for operating a crypto Ponzi scheme
• Forsage.io defrauded retail investors out of $300 million, the SEC said. 
• The scheme's largest promotional group ran in the US from at least five different states.

The Securities and Exchange Commission on Monday charged 11 people for operating a crypto scheme that allowed them to raise more than $300 million from millions of retail investors worldwide. 

The so-called Ponzi scheme centered on Forsage.io, a website that allowed millions of retail investors to enter into transactions through smart contracts that operated on the Ethereum, Tron, and Binance blockchains, the agency said in a statement. US-based promoters of the website were among those charged, along with Forsage's four founders who were last known to be living in Russia, the Republic of Georgia, and Indonesia. 

The SEC alleged Forsage ran as a pyramid scheme for more than two years and investors earned money by recruiting others into the scheme. Also, Forsage allegedly used assets from new investors to pay earlier investors in a typical Ponzi structure.  

Forsage was "launched on a massive scale and aggressively marketed to investors," Carolyn Welshhans, the SEC's acting chief of its Crypto Assets and Cyber Unit, said in the statement.  "Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains."

Cease-and-desist actions were by the Securities and Exchange Commission of the Philippines in September 2020 and by the Montana Commissioner of Securities and Insurance in March 2021, the agency said. Still, the defendants, promoted the schemes while denying the claims in several YouTube videos and by other means, the regulator said. 

The Forsage website was pushed as well by several members of the Crypto Crusaders, the scheme's largest promotional group that ran in the US from at least five different states.

The SEC in a complaint filed in federal court in the Northern District of Illinois charged seven people, along with the four founders, with violating registration and anti-fraud provisions set out in federal securities laws. The agency said it sought injunctive relief, disgorgement, and civil penalties.

Two of the defendants – one from Kentucky and one from Wisconsin – agreed to settle the charges and to be permanently enjoined from future violations of the charged provisions and certain other activity. The settlements were subject to court approval.

Forsage was launched in January 2020 by Vladimir Okhotnikov, Mikhail Sergeev, Sergey Maslakov and a defendant  known as "Lola Ferrari, " the SEC said. 

In May, the SEC said it nearly doubled the size of its Crypto Assets and Cyber Unit to dedicate more resources toward protecting investors in the growing crypto market. The unit was created in 2017, and had previously said it  had brought more than 80 enforcement actions related to fraudulent and unregistered crypto asset offerings and platforms, leading to monetary relief of more than $2 billion.