A Federal grand jury in the District of Oregon has indicted four Russian nationals founders of Forsage decentralized finance (DeFi) cryptocurrency investment platform for allegedly running a global Ponzi and pyramid scheme that raised $340 million.
Forsage was promoted as a “smart contract system” that automatically distributes income to investors based on an algorithm, not requiring manual withdrawal requests.
The project promised 100% transparency, complete decentralization, peer-to-peer transactions, no owner/admin, no chance of scams or sudden shutdown, and no company or third party involved.
However, the reality couldn’t be farther from that, as most Forsage investors soon found out that they were making no profit and, in many cases, lost all their investments.
The defendants, Vladimir Okhotnikov, Olena Oblamska, Mikhail Sergeev, and Sergey Maskalov, face charges of running aggressive false advertisements on social media, pushing misleading investment and business opportunities related to Forsage to aspiring investors.
Instead of a legitimate investment system, the defendants coded and deployed smart contracts on Forsage that essentially systematized a combination of Ponzi and pyramid schemes on the Ethereum, Binance Smart Chain, and Tron blockchains.
“As soon as an investor invested in Forsage by purchasing a “slot” in a Forsage smart contract, the smart contract automatically diverted the investor’s funds to other Forsage investors, such that earlier investors were paid with funds from later investors,” – U.S. Department of Justice
Using blockchain forensic analysis, it was confirmed that over 80% of Forsage investors received less ETH than they had invested through Forsage. About half of all investors didn’t get anything at all.
Court documents show that the platform’s founders used malicious code to direct large portions of the investor funds outside Forsage and into cryptocurrency wallets they controlled.
This contradicted Forsage’s promises to investors, including that “100% of the income goes directly and transparently to the members of the project with zero risk.”
If the four defendants are found guilty of the alleged crimes, they face a maximum prison sentence of 20 years each.
It is worth noting that Forsage’s website and social media channels are still online, claiming that the platform has distributed over $2.3 billion to over 2 million investors (Twitter data), or $1.5 billion to 2.7 million investors (website data).
