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SEC Charges Eleven Individuals in $300M Crypto Pyramid Scheme

201 points by makaimc 4y ago

gregdoesit 4y ago
> “ Despite cease-and-desist actions against Forsage for operating as a fraud in September 2020 by the Securities and Exchange Commission of the Philippines and in March 2021 by the Montana Commissioner of Securities and Insurance, the defendants allegedly continued to promote the scheme while denying the claims in several YouTube videos and by other means.” Even now, the site Forsage.io is live, and claims that 2,559 people joined the past 24 hours. Who knows if it’s true. But how does this work: when a site like this is charged with fraud, can it operate until there is a verdict, defrauding more unsuspecting victims? Needless to say, visitors to the site will have know knowledge of this lawsuit.
- wil421 4y ago
  I doubt the Filipino SEC or the Montana whatever office has the ability. The US SEC doesn’t prosecute but they can give information to Federal Prosecutors. My guess is they don’t have the legal authority or capability to do those things.
- dannyw 4y ago
  If it's actually on chain as a smart contract, it can't be shut down unless the code was written to allow it.
  - gtvwill 4y ago
    You could make hosting and distribution of the code a prohibited act. Wanna still host that Blockchain if it can get you arrested? Just cus it lives as code doesn't mean someone or some group isn't responsible for distributing it.
    - aliqot 4y ago
      Now do the same, but with DNS records.
    - echelon 4y ago
      > You could make hosting and distribution of the code a prohibited act. Wanna still host that Blockchain if it can get you arrested? And there goes the blockchain. I'm shocked it hasn't happened already given the fact that many popular blockchains allegedly host illegal images in the transaction metadata. That's all the FBI needs. The only reason I can imagine is that blockchain and crypto are still useful to people in certain positions. Exfiltrating money from foreign regimes, etc.
      - hnthrow1010 4y ago
        >Exfiltrating money from foreign regimes, etc. Crypto isn't useful for that. The thing that's actually useful for that is the illegal, unregulated exchange that's making the trade. It doesn't matter what currency they trade it for, it could be anything else besides crypto tokens. Crypto actually just adds extra unnecessary steps because the end goal is almost always to get it back out in another local currency. Unless you plan to get the money and then only spend it on NFTs.
      - survirtual 4y ago
        If you ban something that can’t be banned and, surprise, people keep using the unbannable thing, it makes you look very very weak as a governance org. That perception of weakness is significantly more costly than the existence of the target, especially when you can just control human minds via saying things like “look at how much energy it uses and it does nothing at all!” — and most people will believe it!
      - harambae 4y ago
        https://www.bbc.com/news/technology-47130268 https://www.bbc.com/news/technology-47130268 For anyone who isn't familiar with that story (maybe there are other cases, I'm not sure) Seems more like (a very dark form of) trolling
    - survirtual 4y ago
      On another note, restricting code like this is a terrible precedent. I believe code is part of free speech, but in many respects, even more sacred — like mathematics.
  - shpx 4y ago
    Or if the majority of people running the blockchains (nodes or miners) write code to never accept transactions involving that contract or roll back the chain to before that contract was deployed or any number of things.
  - humaniania 4y ago
    You think blockchain is immune to DDoS?
    - kayamon 4y ago
      Good luck taking down Bitcoin.
  - tpetry 4y ago
    Being on chain doesn‘t have an impact if it still needs centralised architecture like DnS and a webserver with a static ip. It‘s no problem taking them down if it would be legal to do so. But I don‘t know why its not legal to simply cut them off.
paulpauper 4y ago
74 votes and a single comment, I think that is record high ratio. The Securities and Exchange Commission today charged 11 individuals for their roles in creating and promoting Forsage, a fraudulent crypto pyramid and Ponzi scheme that raised more than $300 million from millions of retail investors worldwide, including in the United States. Those charged include the four founders of Forsage, who were last known to be living in Russia, the Republic of Georgia, and Indonesia, as well as three U.S.-based promoters engaged by the founders to endorse Forsage on its website and social media platforms, and several members of the so-called Crypto Crusaders—the largest promotional group for the scheme that operated in the United States from at least five different states. I never heard of it. For some reason despite following crypto closely I have never heard to 90% of these frauds despite the frauds being so big. Maybe the fraud is some weird front for money laundering, so they don't try to promote it much. Also , no end to the YouTube scam livestreams. For some reason, YouTube Saylor and Musk giveaway scams stay under radar forever (no arrests, no indictments) despite many arrests and indictments for other frauds, like ransomware, mlm, insider trading (coinbase & opensea). Goes to show how some scams and criminals are better than others. Interesting
- civilized 4y ago
  > YouTube Saylor and Musk giveaway scams I think I saw one of these once. It involved an atrocious (but still somehow impressive) deepfake of Musk. Is this common?
  - paranoidrobot 4y ago
    No idea about the deepfake thing, but a few years ago I noticed a whole bunch of old channels that I had subscribed to were taken over and replaced with Musk-related giveaway scams. Never watched any of the videos or livestreams - the title, thumbnail and (renamed) channel name were enough to make it obviously scams. Youtube is incredibly slow to respond to these kinds of things.
  - wmf 4y ago
    They're very common; I've seen a dozen or more. The ones I've seen don't look like deepfakes; they're random Elon Musk or Cathie Wood videos with a URL for a scam site superimposed.
paranoidrobot 4y ago
I mean, it's some progress, I guess. How long until the US Gov goes after all the folks who keep doing pump & dump/"rug pull" b.s with new coins? There seems to be a never-ending trail of those.
- 3np 4y ago
  It's not super clear but it seems like that's essentially part of what they're being charged for and was behind the first C&D? I do think there's a lot more underway and coming.
- flatiron 4y ago
  I’m not educated on crypto but wouldn’t it be easier to go after the fiat->coin people or do people really just mine / buy coin with cash?
  - TedDoesntTalk 4y ago
    What crime are the fiat->coin exchanges committing? (Excluding the insider trading of one individual at coinbase)
    - hnthrow1010 4y ago
      If you ask me, they should all be shut down for selling unregistered securities, because all crypto tokens fit closest to that definition more than anything else. It's impossible for these tokens to actually function as a currency, both technically and legally. They're not a new class of assets, the idea of tradable tokens is not new either.
      - flatiron 4y ago
        Exactly my point. They are selling in fiat currency a lie. That 100% is accessible for litigation. The whole crypto->crypto thing could be seen as not a crime because who can tell it’s worth other than the darn fiat converter!
    - 4y ago
Sp4mBo7 4y ago
birdyrooster 4y ago
- deleted 4y ago
  [deleted]
z9znz 4y ago
Interesting that I had not even heard of this. My previous client was connected to the types of people who were constantly relaying garbage like this, and unfortunately he would pass most of them to me for review. Almost always I would have to explain that they were almost certainly scams or utterly foolish nonsense ventures. (Usually they were intentionally malfeasant, not naive foolishness.) The one that blew my mind was Nasgo, a nonsense fake "mining" system which was clearly trying to confuse people with Nasdaq. A few years ago they put on massive performances and hosted hundreds of guests. It was obvious to anyone who was not a greedy non-technical fool that it was a scam, but greed really does something to people. You just could not tell people the problems of this thing, because their ears were closed. So looking now, I see in 2019 the coin was theoretically worth 98 cents. Now it is worth about 1/10th of a cent. It was an outright scam of grand scale, with fireworks and conventions and such, and the people who created it surely made off with millions. I would guess that there are at least 10 or more similar stories for each year or two. There was the most famous Onecoin and so many that followed.
- latchkey 4y ago
  Speaking of mining scams... Envion [1] was a good one too. Amazingly, it still even has updates! [2] [1] https://www.yahoo.com/news/envion-ico-scandal-both-sides-151004315.html https://www.yahoo.com/news/envion-ico-scandal-both-sides-151... [2] https://www.envion-konkurs.ch/en/ https://www.envion-konkurs.ch/en/

201 points by makaimc 4y ago

> “ Despite cease-and-desist actions against Forsage for operating as a fraud in September 2020 by the Securities and Exchange Commission of the Philippines and in March 2021 by the Montana Commissioner of Securities and Insurance, the defendants allegedly continued to promote the scheme while denying the claims in several YouTube videos and by other means.” Even now, the site Forsage.io is live, and claims that 2,559 people joined the past 24 hours. Who knows if it’s true. But how does this work: when a site like this is charged with fraud, can it operate until there is a verdict, defrauding more unsuspecting victims? Needless to say, visitors to the site will have know knowledge of this lawsuit.

wil421 4y ago
I doubt the Filipino SEC or the Montana whatever office has the ability. The US SEC doesn’t prosecute but they can give information to Federal Prosecutors. My guess is they don’t have the legal authority or capability to do those things.
dannyw 4y ago
If it's actually on chain as a smart contract, it can't be shut down unless the code was written to allow it.
- gtvwill 4y ago
  You could make hosting and distribution of the code a prohibited act. Wanna still host that Blockchain if it can get you arrested? Just cus it lives as code doesn't mean someone or some group isn't responsible for distributing it.
  - aliqot 4y ago
    Now do the same, but with DNS records.
  - echelon 4y ago
    > You could make hosting and distribution of the code a prohibited act. Wanna still host that Blockchain if it can get you arrested? And there goes the blockchain. I'm shocked it hasn't happened already given the fact that many popular blockchains allegedly host illegal images in the transaction metadata. That's all the FBI needs. The only reason I can imagine is that blockchain and crypto are still useful to people in certain positions. Exfiltrating money from foreign regimes, etc.
    - hnthrow1010 4y ago
      >Exfiltrating money from foreign regimes, etc. Crypto isn't useful for that. The thing that's actually useful for that is the illegal, unregulated exchange that's making the trade. It doesn't matter what currency they trade it for, it could be anything else besides crypto tokens. Crypto actually just adds extra unnecessary steps because the end goal is almost always to get it back out in another local currency. Unless you plan to get the money and then only spend it on NFTs.
    - survirtual 4y ago
      If you ban something that can’t be banned and, surprise, people keep using the unbannable thing, it makes you look very very weak as a governance org. That perception of weakness is significantly more costly than the existence of the target, especially when you can just control human minds via saying things like “look at how much energy it uses and it does nothing at all!” — and most people will believe it!
    - harambae 4y ago
      https://www.bbc.com/news/technology-47130268 https://www.bbc.com/news/technology-47130268 For anyone who isn't familiar with that story (maybe there are other cases, I'm not sure) Seems more like (a very dark form of) trolling
  - survirtual 4y ago
    On another note, restricting code like this is a terrible precedent. I believe code is part of free speech, but in many respects, even more sacred — like mathematics.
- shpx 4y ago
  Or if the majority of people running the blockchains (nodes or miners) write code to never accept transactions involving that contract or roll back the chain to before that contract was deployed or any number of things.
- humaniania 4y ago
  You think blockchain is immune to DDoS?
  - kayamon 4y ago
    Good luck taking down Bitcoin.
- tpetry 4y ago
  Being on chain doesn‘t have an impact if it still needs centralised architecture like DnS and a webserver with a static ip. It‘s no problem taking them down if it would be legal to do so. But I don‘t know why its not legal to simply cut them off.

paulpauper 4y ago

74 votes and a single comment, I think that is record high ratio. The Securities and Exchange Commission today charged 11 individuals for their roles in creating and promoting Forsage, a fraudulent crypto pyramid and Ponzi scheme that raised more than $300 million from millions of retail investors worldwide, including in the United States. Those charged include the four founders of Forsage, who were last known to be living in Russia, the Republic of Georgia, and Indonesia, as well as three U.S.-based promoters engaged by the founders to endorse Forsage on its website and social media platforms, and several members of the so-called Crypto Crusaders—the largest promotional group for the scheme that operated in the United States from at least five different states. I never heard of it. For some reason despite following crypto closely I have never heard to 90% of these frauds despite the frauds being so big. Maybe the fraud is some weird front for money laundering, so they don't try to promote it much. Also , no end to the YouTube scam livestreams. For some reason, YouTube Saylor and Musk giveaway scams stay under radar forever (no arrests, no indictments) despite many arrests and indictments for other frauds, like ransomware, mlm, insider trading (coinbase & opensea). Goes to show how some scams and criminals are better than others. Interesting

civilized 4y ago
> YouTube Saylor and Musk giveaway scams I think I saw one of these once. It involved an atrocious (but still somehow impressive) deepfake of Musk. Is this common?
- paranoidrobot 4y ago
  No idea about the deepfake thing, but a few years ago I noticed a whole bunch of old channels that I had subscribed to were taken over and replaced with Musk-related giveaway scams. Never watched any of the videos or livestreams - the title, thumbnail and (renamed) channel name were enough to make it obviously scams. Youtube is incredibly slow to respond to these kinds of things.
- wmf 4y ago
  They're very common; I've seen a dozen or more. The ones I've seen don't look like deepfakes; they're random Elon Musk or Cathie Wood videos with a URL for a scam site superimposed.

paranoidrobot 4y ago

I mean, it's some progress, I guess. How long until the US Gov goes after all the folks who keep doing pump & dump/"rug pull" b.s with new coins? There seems to be a never-ending trail of those.

3np 4y ago
It's not super clear but it seems like that's essentially part of what they're being charged for and was behind the first C&D? I do think there's a lot more underway and coming.
flatiron 4y ago
I’m not educated on crypto but wouldn’t it be easier to go after the fiat->coin people or do people really just mine / buy coin with cash?
- TedDoesntTalk 4y ago
  What crime are the fiat->coin exchanges committing? (Excluding the insider trading of one individual at coinbase)
  - hnthrow1010 4y ago
    If you ask me, they should all be shut down for selling unregistered securities, because all crypto tokens fit closest to that definition more than anything else. It's impossible for these tokens to actually function as a currency, both technically and legally. They're not a new class of assets, the idea of tradable tokens is not new either.
    - flatiron 4y ago
      Exactly my point. They are selling in fiat currency a lie. That 100% is accessible for litigation. The whole crypto->crypto thing could be seen as not a crime because who can tell it’s worth other than the darn fiat converter!
  - 4y ago

Sp4mBo7 4y ago

birdyrooster 4y ago

deleted 4y ago
[deleted]

z9znz 4y ago

Interesting that I had not even heard of this. My previous client was connected to the types of people who were constantly relaying garbage like this, and unfortunately he would pass most of them to me for review. Almost always I would have to explain that they were almost certainly scams or utterly foolish nonsense ventures. (Usually they were intentionally malfeasant, not naive foolishness.) The one that blew my mind was Nasgo, a nonsense fake "mining" system which was clearly trying to confuse people with Nasdaq. A few years ago they put on massive performances and hosted hundreds of guests. It was obvious to anyone who was not a greedy non-technical fool that it was a scam, but greed really does something to people. You just could not tell people the problems of this thing, because their ears were closed. So looking now, I see in 2019 the coin was theoretically worth 98 cents. Now it is worth about 1/10th of a cent. It was an outright scam of grand scale, with fireworks and conventions and such, and the people who created it surely made off with millions. I would guess that there are at least 10 or more similar stories for each year or two. There was the most famous Onecoin and so many that followed.

latchkey 4y ago
Speaking of mining scams... Envion [1] was a good one too. Amazingly, it still even has updates! [2] [1] https://www.yahoo.com/news/envion-ico-scandal-both-sides-151004315.html https://www.yahoo.com/news/envion-ico-scandal-both-sides-151... [2] https://www.envion-konkurs.ch/en/ https://www.envion-konkurs.ch/en/