The scheme, called Forsage, solicited over $300 million from investors in the U.S.A. and elsewhere. The four founders, Vladimir Okhotnikov, Lola Ferrari, Mikhail Sergeev, and Sergey Maslakov, were among those charged.
They are believed to be residing in Russia, the Republic of Georgia, and Indonesia. Three U.S.-based promoters that were responsible for promoting the scheme were also charged.
The SEC had initially filed a complaint against the founders in Jan. 2020, who had formed Forsage.io, offering customers the chance to deposit money into smart contracts on the Ethereum, Tron, and Binance Smartchain blockchains.
Forsage had operated as a pyramid scheme where old investors earned profits by recruiting new members. It also allegedly had a Ponzi element, where assets from new investors were used to pay old investors.
Despite the Philippines’ and Montana securities regulators issuing a cease-and-desist order against Forsage in Sep. 2020, promoters continued peddling the investment scheme and denying any wrongdoing.
The SEC filed a complaint in the United States District Court in the Northern District of Illinois against individuals from Missouri, Idaho, Kentucky, Virginia, Illinois, Florida, and Wisconsin on the grounds of violating securities registration and anti-fraud provisions of federal securities laws.
Two defendants elected to settle the matter out of court and pay disgorgement and civil penalties without admitting or denying culpability.
Before this case, the SEC had charged three individuals, including a former Coinbase product manager, with insider trading. The three individuals abused privileged information about future token listings to line their pockets. Coinbase had warned employees not to disclose this confidential information.
Ishan Wahi, the former product manager, failed to heed the warnings from June 2021 to April 2022, informing his brother Nikhil Wahi and friend Sameer Ramani who earned $1.1 million in illegal profits. The SEC affirmed that some of the 25 tokens traded were securities, placing the perpetrators in violation of securities laws dealing with insider trading.