Russian founders of crypto project operated classic Ponzi scheme

Table of Contents

• The indictment
• A Ponzi scheme
• Fraudulently promoted

The four Russian founders of DeFi platform Forsage have been indicted in the US on charges of running a $340 million Ponzi scheme.

According to the US Justice Department, four Russian nationals were charged with operating a Ponzi scheme. The fraudulent scheme employed smart contracts on the Ethereum, Binance Smart Chain, and Tron blockchains.

The indictment

On the Department of Justice website, a statement described the indictment against the four:

As alleged in the indictment, the defendants aggressively promoted Forsage to the public through social media as a legitimate and lucrative business opportunity, but in reality, the defendants operated Forsage as a Ponzi and pyramid investment scheme that took in approximately $340 million from victim-investors around the world.

The four Russian founders of Forsage, all nationals, are Vladimir Okhotnikov, Olena Oblamska, Mikhail Sergeev and Sergey Maslakov. If they are convicted of the fraud they can expect up to 20 years’ imprisonment.

The court documents held more details of what the investigating authorities had uncovered, and this was smart contract code that automatically diverted any funds that were invested in the platform out to other investors.

A Ponzi scheme

This was said to be consistent with a Ponzi scheme in that investors that had got in first were paid with the funds of incoming investors.

U.S. Attorney Natalie Wight was quoted by the Justice Department, saying how complex this particular case was:

“Today’s indictment is the result of a rigorous investigation that spent months piecing together the systematic theft of hundreds of millions of dollars. Bringing charges against foreign actors who used new technology to commit fraud in an emerging financial market is a complicated endeavor only possible with the full and complete coordination of multiple law enforcement agencies. It is a privilege to work alongside the agents involved in these complex cases.”

Fraudulently promoted

It was also noted in the indictment that Forsage had been promoted through its website and social media platforms as a “legitimate, low-risk, and lucrative investment opportunity.”

The indictment contradicts this by stating that more than 50% of investors never saw any returns on their investments, and more than 80% of them received less ETH back than they had invested into the Forsage Ethereum program.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.