About 340 million dollars invested were completely controlled by the founders of the platform.
A federal grand jury in the District of Oregon has indicted four Russian citizens, founders of cryptocurrency investment platform Forsage Decentralized Finance (DeFi), of running a global pyramid scheme that raised $340 million in investment.
Forsage was advertised as a "smart contract system" that automatically distributes income to investors based on an algorithm, without requiring manual withdrawal requests. The project promised 100% transparency, full decentralization, peer-to-peer transactions, no owner/administrator, and no chance of fraud/platform shutdown. As well as the absence of an involved company or third party.
However, the reality turned out to be cruel: many Forsage investors quickly found that they did not receive any profit and did not have the opportunity to dispose of the invested funds.
Defendants Vladimir Okhotnikov, Elena Oblamskaya, Mikhail Sergeyev and Sergey Maskalov have been charged with posting aggressive false advertising on social media, spreading misleading investment and business opportunities related to Forsage to novice investors.
Instead of a legitimate investment system, the defendants coded and implemented smart contracts in Forsage, which, in fact, systematized a combination of financial pyramids on the Ethereum, Binance Smart Chain and Tron blockchains.
“Once an investor has invested in Forsage by purchasing a ‘slot’ in the Forsage smart contract, the smart contract automatically redirects the investor’s funds to other Forsage investors, so that earlier investors are paid funds from later investors,” the U.S. Department of Justice said.
Through blockchain forensics, it has been confirmed that over 80% of Forsage investors received less ETH than they invested. About half of all investors received nothing at all.
Court documents show that the founders of the platform used malicious code to funnel a large portion of investor funds outside of Forsage into cryptocurrency wallets they controlled. This was contrary to Forsage's promises, including that "100% of revenue goes directly and transparently to project participants with zero risk."
If the four defendants are found guilty of the alleged crimes, they face a maximum prison sentence of 20 years each.
It is worth noting that the Forsage website and social media channels are still operational. According to the platform itself, more than $1.5 billion has been distributed to 2.7 million investors so far. As described above, it is unlikely that these figures are at least somewhat true.