U.S. DOJ Charges Forsage Founders for $340M DeFi Crypto Scheme

The United States Department of Justice (DOJ) has charged the four co-founders of Forsage for allegedly operating a $340 million Ponzi scheme that masqueraded itself as decentralized finance (DeFi) cryptocurrency investment platform.

DOJ Charges Forsage Founders

In a Wednesday press release, the DOJ alleged that Vladimir Okhotnikov, Olena Oblamska, Mikhail Sergeev, and Sergey Maslakov, all Russian nationals, promoted Forsage as a legitimate and lucrative business opportunity on social media but in reality, it was a Ponzi and pyramid investment scheme.

The court documents stated that the defendants coded and deployed smart contracts on the Ethereum (ETH), Binance Smart Chain, and Tron blockchains that systematized the process of diverting funds deposited by later investors to earlier investors, making it a typical Ponzi scheme. 

According to the DOJ, blockchain analysis revealed that over 80% of Forsage investors received fewer ETH back than they had invested in the scheme, while over 50% of investors never received a single payout. 

Moreover, the defendants coded at least one of Forsage’s accounts “in a way that fraudulently siphoned investors’ funds out of the Forsage investment network and into cryptocurrency accounts” controlled by the founders, according to the department.

“While advancements in the virtual asset ecosystem bring new opportunities to investors, criminals are also finding new ways to orchestrate illicit schemes,” Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division said.

The defendants have each been charged with conspiracy to commit wire fraud. They could face a maximum penalty of 20 years in prison if convicted.

SEC Announces Separate Charges Against Defendants

The latest indictment follows the United States Securities and Exchange Commission (SEC) charging the defendants, alongside seven other individuals connected to the alleged scheme.

Per SEC’s findings, Forsage operated as a pyramid scheme for more than two years across five different states in the United States, in which investors earned profits by recruiting others into the scheme. The US state of Montana also issued a cease and desist order against Forsage in April 2021, calling it a pyramid scheme.