The Securities and Exchange Commission (SEC) has charged 11 individuals for their alleged role in the creation of a “fraudulent crypto pyramid scheme” platform Forsage. The charges were laid in a United States District Court in Illinois on August 1, with the SEC alleging that the founders and promoters of the platform used the “fraudulent crypto pyramid and Ponzi scheme” to raise more than $300 million from “millions of retail investors worldwide.”The SEC complaint states that Forsage was modeled such that investors would be financially rewarded by recruiting new investors to the platform in a “typical Ponzi structure,” which spanned multiple countries including the United States and Russia. According to the SEC, a Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. These schemes often solicit new investors by promising to invest funds in opportunities that generate high returns for little risk. In the court document, the SEC stated that: “It [the Forsage platform] did not sell or purport to sell any actual, consumable product to bona fide retail customers during the relevant time period and had no apparent source of revenue other than funds received from investors. The primary way for investors to make money from Forsage was to recruit others into the scheme.”According to the SEC, Forsage’s alleged Ponzi scheme works by firstly enabling new investors to set up a crypto-asset wallet and purchase “slots” from Forsage’s smart contracts. Those slots would give them the right to earn compensation from others whom they recruited into the scheme, referred to as “downlines”, and also from the community of Forsage investors in the form of profit sharing, referred to as “spillovers”.Carolyn Welshhans, Acting Chief of the SEC’s Crypto Assets and Cyber Unit called Forsage a “fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors.”She also added that decentralized technologies cannot act as an escape route for illegal conduct: “Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.”In addition to the four founders, who include Vladimir Okhotnikov, Jane Doe aka Lola Ferrari, Mikhail Sergeev, and Sergey Maslakov, the SEC’s complaint also included seven promoters, three of which were in a U.S.-based promotional group called the “Crypto Crusaders”.All 11 individuals have been charged with violating “Unregistered Offers and Sales of Securities” under Section 5 A & C and “Fraud” under Section 17(a) (1 & 3) of the US Securities Act. The defendants have also been charged with “Fraud” under Section 10 B-C of the US Exchange Act.These efforts enabled the Ponzi structure to capture the massive scale that it achieved from retail investors buying into the model over the last two years, said Welshhans.Related: How to identify and avoid a crypto pump-and-dump scheme?In September 2020, Forsage was subject to cease-and-desist orders from the Philippines SEC. In March 2021, the platform also received cease and desist orders from the Montana Commissioner of Securities and Insurance.Forsage’s YouTube channel shows that their platform was promoted as little as ten days ago. The platform’s Twitter account also appears active. EdaFace reached out to Forsage to provide a comment on the matter but did not receive an immediate response.