Wall Street watchdog, the Securities and Exchange Commission (SEC), has charged eleven people in an alleged $300 million cryptocurrency pyramid scheme, highlighting how authorities are increasing enforcement in digital asset markets.
The fraudulent crypto pyramid and Ponzi scheme, Forsage allegedly raised more than $300 million from retail investors in an illicit way, in countries across the globe, including the United States.
The scheme claimed to be a decentralized smart contract platform, where it allowed millions of retail investors to enter into transactions via smart contracts that operated on the Ethereum, Tron, and Binance blockchains.
SEC further alleges that the scheme which has been running for more than two years was set up and functioned like a standard pyramid scheme, in which investors earned profits by recruiting others into the operation.
It had a structure wherein it allegedly used assets from new investors to pay earlier ones. The acting chief of SEC’s crypto assets and the cyber unit, Mrs. Carolyn Welshans in a statement stated that fraudsters cannot circumvent the federal security laws by focusing their schemes on smart contracts and blockchains.
Forsage, through its support platform, declined to offer a method for contacting the company and did not issue any statement. SEC has however charged the organization’s four founders and a series of people with promoting the nine-figure scheme.
The Securities and Exchange Commission also charged three U.S based promoters who endorsed Forsage on their social media platforms. Two defendants, both of whom did not admit or deny the allegations, agreed to settle the charges, subject to court approval.
According to the SEC, a few other individuals accused in the scheme, continued promoting the scheme and denied the allegations in several YouTube videos. A YouTube channel that claims to be the official one for Forsage has garnered around 170,000 views and has roughly 6,500 subscribers.
The YouTube channel comprises videos, most roughly a minute of people talking about how their lives have been improved by Forsage. This is not the first time that Forsage has been labeled as a fraudulent scheme. The scheme in September 2020, was subject to cease-and-desist orders from the Philippines SEC.
In March 2021, the platform also received the same order from the Montana commissioner of securities and insurance. There is no disputing the fact that the crypto ecosystem has been infiltrated by fraudulent Ponzi schemes operating as legit.
It is therefore imperative for individuals most especially investors to educate themselves properly about the crypto ecosystem to avoid falling for these Ponzi schemes and as well losing their investments. These schemes are otherwise known as pump-and-dump, an orchestrated fraud in the crypto ecosystem that involves misleading investors into purchasing artificially inflated tokens.
Once investors have purchased such Tokens at inflated prices, the people who own the biggest pile of tokens will then sell out resulting in an immediate crash in the token prices. Usually, these pump-and-dump schemes are usually accompanied by false promises around three broad categories, which are; guaranteed exorbitant returns, hype from influencers, and solving real-world use cases.