DeFi “Ponzi scheme” Founders Indicted

Forsage used Ponzi-like smart contracts, according to the DOJ.

A federal grand jury in Oregon indicted the founders of the $340 million “global Ponzi” scheme Forsage.

A Feb. 22 Department of Justice (DOJ) statement accused the four Russian founders, Vladimir Okhotnikov, Olena Oblamska, Mikhail Sergeev, and Sergey Maslakov, of playing important roles in the scheme that raised $340 million from victim-investors.

“Today’s indictment is the result of a rigorous investigation that spent months piecing together the systematic theft of hundreds of millions of dollars,” said U.S. Attorney Natalie Wight for the District of Oregon, adding:

“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.”

Forsage, a low-risk decentralized finance platform on the Ethererum blockchain, promised long-term passive income. Blockchain analytics showed that 80% of Forsage “investors” lost money.

The DOJ found that new investors’ “slots” in Forsage’s smart contracts were routed to older investors, indicating a “Ponzi scheme.”

On Feb. 22, Forsage tweeted that community members in “The Ambassador Program” might receive monthly incentives by fulfilling chores.

The SEC accused the four founders and seven promoters with fraud and selling unregistered securities on August 1. Carolyn Welshhans, interim chief of the SEC’s Crypto Assets and Cyber Section, said:

“Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.”

In 2020, the Philippines Securities and Exchange Commission labeled Forsage a Scam, yet a month later it was the second-most popular Ethereum DApp.

A charge occurs when a prosecutor accuses a person or organization of a crime, but an indictment is filed by a grand jury if prosecutors can persuade a majority of them.

In federal and serious state felony crimes, grand juries are often used.

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