DoJ Indicted Forsage Founders for $340M DeFi Ponzi Scheme
- The DoJ discovered the Forsage used smart contracts with coding consistent of a Ponzi scheme, and charged its four founders with conspiracy to commit wire fraud.
- The U.S. SEC charged nearly a dozen individuals involved in the DeFi platform in August 2022, while the Philippines SEC flag Forsage as a Ponzi scheme back in 2020.
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A federal grand jury in the District of Oregon has indicted the founders of Forsage for their involvement in the alleged $340 million “global Ponzi” scheme, the Department of Justice (DoJ) said in a press release on 22 February.
According to the announcement, all four Russian founders of decentralized finance (DeFi) investment platform Forsage — Vladimir Okhotnikov, Olena Oblamska, Mikhail Sergeev and Sergey Maslakov — were charged with conspiracy to commit wire fraud. The individuals were also accused of heavily promoting Forsage as a legitimate platform, when in fact it was a fraudulent scheme that raised $340 million from investors. The DoJ wrote in the press release:
“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 indictment was the result of a rigorous investigation, which found that the operations of Forsage were “consistent with a Ponzi scheme”. According to the DoJ, as soon as a new investor purchased a “slot” in a Forsage smart contract, the smart contract automatically diverted the investor’s funds to earlier investors, such that they were paid with funds from new investors.
This is not the first time the DeFi platform was accused of fraud in the U.S., with the Securities and Exchange Commission (SEC) charging nearly a dozen people in August 2022 with fraud and selling unregistered securities. The platform — which operates on the Ethereum, Binance Smart Chain, and Tron blockchains — was also flagged as a likely Ponzi scheme in 2020 by the Philippines SEC. Despite all of these accusations, Forsage continues to promote its services on social media, tweeting on 22 February:
- The prosecution tried to paint FTX’s founder as someone who deliberately deceived his customers to get rich, and noted that he directed all activities that led to the failure of the company.
- The defense’s claimed SBF was an entrepreneur whose plans simply “didn’t work out”, and tried to cast the blame for Alameda’s downfall to its former CEO Caroline Ellison.
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- Sam Bankman-Fried’s legal counsel had claimed he should not be charged with any crimes involving FTX as it was not regulated in the U.S., only FTX.US was.
- The DoJ said the claim was irrelevant as SBF was charged for violating existing laws for misappropriating customer assets.
- SBF’s legal team argued that the former FTX CEO did not intend to tamper with the witnesses, and that the DoJ’s request was based on “thin” factual grounds.
- The DoJ filed a motion last week requesting to dismiss SBF’s bail, alleging that he shared Caroline Ellison’s personal diary with the New York Times in order to intimidate her.