SEC Charges 11 in Crypto Ponzi Scheme

August 2, 2022 by Madeline Hughes
SEC Charges 11 in Crypto Ponzi Scheme

WASHINGTON — Eleven people were charged in a $300 million cryptocurrency Ponzi scheme targeting Americans and people abroad Monday by the Securities and Exchange Commission.

They were charged of fraud for their blockchain networking company, Forsage, promoting itself as the “#1 smart contract for your decentralized business” with high returns on investments with cryptocurrencies including Ethereum, Tron and Binance blockchains, according to its website. 

Instead, investors actually only stood to make money through recruitment, according to the commission.

“Forsage is a textbook pyramid and Ponzi scheme,” according to the commission’s complaint. “It did not sell or purport to sell any actual, consumable product to bona fide retail customers during the relevant time period and had no apparent source of revenue other than funds received from investors. The primary way for investors to make money from Forsage was to recruit others into the scheme.”

The commission described how the contracts for investors to buy a “slot” directed a portion of the sales to the person who recruited them in its complaint.

Tweets from the company boast membership growth in coordination with the company’s monetary gains.

“As the complaint alleges, Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors,” said Carolyn Welshhans, acting chief of the SEC’s Crypto Assets and Cyber Unit, in a statement. “Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.”

Those charged were living in the United States, Russia, the Republic of Georgia and Indonesia, according to the commission.

The company was started in January 2020 by Vladimir Okhotnikov, Jane Doe, aka Lola Ferrari, Mikhail Sergeev and Sergey Maslakov, all of whom were charged, according to the commission. All four are believed to be Russian nationals, according to the commission. It also is alleging Ferrari’s name is an alias and does not know the real name of the woman who calls herself the “’goddess’ of Forsage,” according to the commission.

Those founders allegedly paid Forsage’s early investors with earnings from new investors, according to the complaint.

The company received multiple cease-and-desist letters, first from the Securities and Exchange Commission of the Philippines in September 2020 and again in March 2021 by the Montana Commissioner of Securities and Insurance, according to the commission.

As of Tuesday, the company is still operating and people can make purchases on its website.

The commission also charged Cheri Beth Bowen of Mississippi, Ronald R. Deering of Idaho, Samuel D. Ellis of Kentucky, Mark F. Hamlin of Virginia, Carlos L. Martinez of Illinois, Alisha R. Shepperd of Florida and Sarah L. Theissen of Wisconsin, with violating the registration and anti-fraud provisions of the federal securities laws. They were essentially the American recruiters, according to the complaint.

Two of the Americans charged, Ellis and Theissen, agreed to settle the charges. Both will be permanently enjoined from future violations of the charged provisions and certain other activities, according to the commission. 

Ellis also agreed to pay back his profits and civil penalties. The court is still determining the amount Theissen will be required to pay back of her profits and in civil penalties, according to the commission.

Madeline can be reached at [email protected] and @MadelineHughes

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