By George Ward
Earlier in the week, a Department of Justice bulletin revealed that the four founders of Forsage were charged with participating in a ” pyramid scheme” where investors lost millions. The announcement identified the perpetrators as Mikhail Sergeev, Vladimir Okhotnikov, Sergey Maslakov, and Olena Oblamskai, all Russians.
Forsage Founder Faces 20 Years Jail Sentence
Additionally, the DoJ alleged that the four individuals promoted Forsage as a decentralized matrix initiative that utilized smart contracts and network marketing. In the charges, the Forsage founders are accused of defrauding victims of over $340 million realized from the whole ordeal.
In a statement, Kenneth Polite, Jr., the Assistant Attorney General of the DoJ’s Criminal Division, emphasized the department’s proficiency in utilizing all investigative tools, including blockchain analysis, to expose intricate frauds associated with cryptocurrency and virtual assets.
On the other hand, many have accused regulators of conducting extra-judicial sweeps and unfairly targeting innocent crypto and DeFi firms. Instead of such actions, Polite Jr. said regulators should focus on prosecuting criminals within the industry to ensure greater safety for investors.
Meanwhile, the four founders of the company in question are facing charges of conspiracy to commit wire fraud. It could result in a maximum prison sentence of 20 years if they are convicted.
In August 2022, the Security and Exchange Commission (SEC) charged the Forsage operators for their alleged involvement in a pyramid scheme. Interestingly, the initial complaint dates back to early 2020.
At the time, the agency uncovered the illegal activities the DeFi platform was promoting. In the Ponzi scheme, older investors earned profits when they brought new users to the platform.
Moreover, upon analyzing the DeFi smart contracts of the platform, SEC discovered that the allegations were indeed true. The contracts diverted funds from new investors to previous ones when they acquired a “slot.”
$75B Lost To DeFi Scams And Hacks
According to Attorney Natalie Wight, the indictment resulted from a thorough investigation that lasted for months. The relevant authorities assembled the evidence of the organized theft during the process.
Furthermore, Luis Quesada, Assistant Director of the FBI’s Criminal Investigative Division, explained that advancements in the crypto ecosystem provide new opportunities and innovations for investors. However, criminals are also discovering novel ways to carry out illegal activities.
Ivan Arvelo, a Special Agent of Homeland Security Investigations (HSI), remarked that the accused allegedly employed fashionable technology and obscure language to deceive investors and fraudulently obtain their hard-earned money.
Furthermore, many DeFi platforms make unrealistic promises of profits and attract investors to fraudulent schemes. Meanwhile, DeFi Yield’s Rekt database data reveals that DeFi hacks, scams, and exploits have resulted in losses exceeding $75 billion.