Forsage founders charged with running a $340 million DeFi “Ponzi scam”
According to the Department of Justice, Forsage used smart contracts that were coded in a Ponzi scheme-like manner.
A federal grand jury in the District of Oregon has indicted the founders of the alleged $340 million “global Ponzi” scheme Forsage.
According to a Feb. 22 Department of Justice (DOJ) statement, the four Russian founders — Vladimir Okhotnikov, Olena Oblamska, Mikhail Sergeev, and Sergey Maslakov — have been formally accused of playing key roles in the scheme that raised approximately $340 million from victim-investors.
“Today’s indictment is the culmination of a rigorous investigation that spent months piecing together the systematic theft of hundreds of millions of dollars,” said US Attorney Natalie Wight for the District of Oregon.
“Bringing charges against foreign actors who used new technology to commit fraud in an emerging financial market is a complicated endeavor only possible with the full and complete coordination of multiple law enforcement agencies.”
Forsage advertised itself as a low-risk decentralised finance platform built on the Ethererum blockchain that enabled users to generate long-term passive income. However, according to blockchain analytics, 80% of Forsage “investors” received less than they put in.
The DOJ found that funds raised as new investors purchased “slots” in Forsage’s smart contracts were diverted to older investors, which is consistent with a “Ponzi scheme.”
Forsage’s Twitter account is still active, and on Feb. 22 he posted a thread claiming that community members who participate in “The Ambassador Program” would be able to earn monthly rewards by completing certain tasks.
The Securities and Exchange Commission charged the four founders and seven promoters with fraud and selling unregistered securities on August 1, with Carolyn Welshhans, acting chief of the SEC’s Crypto Assets and Cyber Unit, saying at the time:
“Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.”
The Philippines Securities and Exchange Commission had also identified Forsage as a possible Ponzi scheme in 2020, but the platform was still the second-most popular DApp on the Ethereum blockchain a month later.
While a charge is when a prosecutor brings criminal charges and accuses an individual or group of an offence, an indictment is when prosecutors convince a majority of a grand jury that a formal accusation is warranted following an investigation.
Grand juries are frequently used in federal and serious state felony prosecutions.