SEC charges 11 in $300M crypto pyramid scheme
Raised over $300 million from investors worldwide
The Securities and Exchange Commission (SEC) has charged 11 people for their involvement in “fraudulent crypto pyramid scheme” platform Forsage that raised more than $300 million from investors.
The scheme, called Forsage, claimed to be a decentralized smart contract platform, and allowed retail investors to enter into transactions via smart contracts on the Ethereum, Tron, and Binance blockchains. However, the SEC is alleging that the platform functioned like a pyramid scheme, in which investors earned profits by recruiting others into the operation.
In the SEC’s complaint, it called Forsage a “textbook pyramid and Ponzi scheme,” in which Forsage aggressively promoted its smart contracts through online promotions and new investment platforms. The complaint adds, “the primary way for investors to make money from Forsage was to recruit others into the scheme.”
According to the SEC, a Ponzi scheme is an investment scam that pays existing investors with funds contributed by new investors. These schemes often solicit new investors by promising to invest in opportunities that will generate high returns with little or no risk.
Forsage enabled new investors to set up a crypto-asset wallet and purchase “slots” in its smart contracts. Those slots gave them the right to earn compensation from anyone they recruited into the scheme, referred to as “downlines,” in addition to from the community of investors in the form of profit sharing of payments, known as “spillovers.”
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