The U.S. Department of Justice (DOJ) has released a statement confirming that four founders of the cryptocurrency firm Forsage have been indicted for over $340 million. According to the DOJ, Forsage used smart contracts created in a fashion similar to a Ponzi scheme.
An indictment is issued by a grand jury. It is released if prosecutors are successful in persuading most of them and a formal accusation is justified after an inquiry. Meanwhile, a charge refers to the situation when a prosecutor files criminal charges and accuses a party of an infraction.
The four founders and main accused are of Russian origin. Their names are Vladimir Okhotnikov, Olena Oblamska, Mikhail Sergeev, and Sergey Maslakov. All four have been officially charged with playing significant roles in the fraud that earned about $340 million from investors.
Forsage marketed itself as a decentralized finance platform on the Ethereum (ETH) network. Moreover, the business allowed users to produce long-term passive income, at least, that’s what they said. However, blockchain analysis allegedly showed that 80% of Forsage “investors” received less money back than they had put in.
How did the cryptocurrency firm execute the Ponzi scheme?
According to the DOJ, when investors buy “slots” in Forsage’s smart contracts, the funds go to older backers. This is exactly how a Ponzi scheme operates.
Moreover, in August 2022, the SEC (Securities and Exchange Commission) accused the four founders and the seven promoters of fraud and the sale of unregistered securities. Carolyn Welshhans, Chief of the SEC’s Crypto Assets and Cyber Unit, said that “fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.”
In 2020, the Philippines SEC also identified Forsage as a possible Ponzi scheme. However, the platform remained the second-most well-liked DApp on the Ethereum network a month later.
Additionally, the Twitter page of the Defi firm is still up and running. They recently posted a thread telling the community that the participants of the “The Ambassador Program” would be able to receive monthly rewards by finishing certain duties.