SEC Charges 11 In Huge Crypto Pyramid Scheme Worth $300 Million

The U.S. Securities and Exchange Commission had on Monday charged 11 individuals for running a huge global crypto fraud. The accused were involved in creating and promoting a fraudulent crypto pyramid and Ponzi scheme that raised more than $300 million. The money was raised from millions of retail investors worldwide, including in the United States, the SEC said.

SEC Crypto Pyramid Scheme Affected Millions Worldwide

Those charged include the four founders of Forsage, the name of the scheme. According to the SEC complaint, the accused had in January 2020 launched Forsage.io, a website that was the center of the fraud. It allowed millions of retail investors to enter into transactions via smart contracts that operated on the Ethereum, Tron, and Binance blockchains.

“Forsage allegedly has operated as a pyramid scheme for more than two years, in which investors earned profits by recruiting others into the scheme. Forsage also allegedly used assets from new investors to pay earlier investors in a typical Ponzi structure.”

This is the second such crypto related fraud that SEC reported its action on. Last month, the commission charged three individuals in the first ever crypto insider trading scheme in the country. It found that a former Coinbase employee allegedly committed fraud by leaking multiple announcements before they were public.

Pyramid Scheme Launched On Massive Scale

Carolyn Welshhans, acting chief of the SEC’s crypto assets and cyber unit, said the SEC got around the scheme despite its focus on smart contracts.

“As the complaint alleges, Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors. Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.”

The crypto scheme, as per the complaint, operated as a pyramid scheme for over two years. The perpetrators allegedly used assets from new investors to pay earlier investors. The SEC charged the 11 individuals with violating the registration and anti-fraud provisions of the federal securities laws.

Anvesh reports major developments around crypto adoption and price analysis. Having been associated with the industry since 2016, Anvesh is a strong advocate of decentralized technologies. Follow Anvesh on Twitter at @AnveshReddyBTC and reach him out at [email protected]

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