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SEC charges founders and promoters of alleged $300M Ponzi scheme

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SEC might label NFTs as Securities
SEC might label NFTs as Securities

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The US Securities and Exchange Commission (SEC) has filed charges against 11 individuals linked to a crypto pyramid scheme known as Forsage. The individuals behind the project managed to solicit over $300 million from investors globally.

SEC charges 11 individuals in crypto Ponzi scheme

The report by the SEC said that the defendants in the case include three promoters currently based in the US and four founders whose last location was Russia. Forsage is a platform claiming to be a bridge between the Ethereum, Binance, and Tron blockchains.

The team had promoted Forsage as a platform that could execute smart contracts across multiple blockchains. However, the company operated like a Ponzi scheme, where the money from new investors paid the old investors and gave rewards to those who recruited more employees.

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A press release by the SEC said that the commission sent a cease and desist order to Forsage in late 2020 and March 2021. However, the platform’s founders failed to heed the regulator’s concerns. They not only denied these allegations but also went ahead to continue promoting their services.

The Acting Chief of the Crypto Assets and Cyber Unit division at the SEC, Carolyn Welshhans, commented on the development, saying that fraudsters could not avoid the federal securities laws through smart contracts and blockchains and harming retail investors that invested in such platforms.

The two defendants based in the US have agreed to settle the civil and disgorgement penalties as highlighted by the court, to resolve the claims made by the SEC. It will clear them from any more violations of the securities laws.

SEC collaborates with FBI to battle crypto crime

The SEC has been actively regulating the cryptocurrency space to ensure investors in the sector are well-protected. One of the recently charged individuals is a former executive at Coinbase. Ishan Wahi was arrested by the SEC amid claims of crypto insider trading.

The deputy director of the FBI, Michael J. Driscoll, also said that the agency was taking an active role within the cryptocurrency ecosystem to prevent fraudsters and criminals from taking advantage of loopholes to conduct illicit activities.

On August 1, Letitia James, the Attorney General of New York, urged all the residents of New York that have suffered losses after investing in cryptocurrency scams to file a complaint so that the prosecutor’s office can follow up on these cases.

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