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Over $300 million raised from retail investors in Ponzi crypto scheme, 11 charged.

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The Securities and Exchange Commission charged 11 people for running a Ponzi crypto scheme in which they raised more than $300 million from retail investors across the world. The fraudulent scheme centered on Forsage.io, a website that allowed millions of retail investors to enter into transactions through smart contracts that operated on Tron, Ethereum, and Binance blockchains.

The agency charged US-based promoters of the portal, as well as Forsage’s four founders, who were said to be living in the Republic of Georgia, Russia, and Indonesia. The SEC alleged Forsage of running a pyramid scheme for more than two years. In an official statement, it said that investors earned by recruiting others into the scheme. Moreover, Forsage used assets from new investors to pay earlier investors in a typical Ponzi structure.

Carolyn Welshhans, the SEC’s acting chief of the Crypto Assets and Cyber Unit, said Forsage was launched on a massive scale and aggressively marketed to investors. She stressed that fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains. Philippines SEC led cease-and-desist actions in September 2020. The Montana Commissioner of Securities and Insurance did the same in March 2021. But the defendants continued to promote the schemes and denied claims in several YouTube videos and other means.

The SEC said the Forsage website was also pushed by several members of the Crypto Crusaders. This is said to be the scheme’s largest promotional group that was run in the United States from five different states. The federal agency charged seven people and four founders for violating the registration and anti-fraud provisions laid out in the federal securities laws. The SEC sought injunction, disgorgement, and civil penalties. Two of the defendants, from Kentucky and Wisconsin respectively, have agreed to settle the charges. They want to be permanently enjoined from future violations of the charged provisions. These are subject to court approval.

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