DeFi Founders of Forsage Ponzi Platform Charged for Fraud

The founders of the Forsage decentralized finance (DeFi) platform have been formally prosecuted by a federal grand jury in the District of Oregon.

According to a Department of Justice bulletin on Feb. 22, the four founders of Forsage were charged for their roles in a “global Ponzi and pyramid scheme.”

The announcement named the all-Russian perpetrators as Vladimir Okhotnikov, Olena Oblamskai, Mikhail Sergeev, and Sergey Maslakov.

Furthermore, the DoJ stated that the four allegedly “touted Forsage as a decentralized matrix project based on network marketing and smart contracts.”

The charges include defrauding “victim investors” out of $340 million raised for the project.

Forsage Founders Face 20 Years

Assistant Attorney General Kenneth Polite, Jr. of the Justice Department’s Criminal Division said:

“Today’s indictment showcases the department’s ability to use all available investigative tools, including blockchain analysis, to uncover sophisticated frauds involving cryptocurrency and digital assets.”

Regulators have been accused of targeting innocent DeFi and crypto firms in extra-judicial sweeps. However, they should spend more time prosecuting criminals in the industry if they want to make it safer for investors.

Furthermore, the four founders face charges of conspiracy to commit wire fraud. They will face a maximum penalty of 20 years in prison if convicted.

The Security and Exchange Commission (SEC) filed the charges against the Forsage operators in August 2022. Its initial complaint goes back to early 2020. The agency flagged the DeFi platform as a pyramid scheme where old investors earned profits by recruiting new members.

Furthermore, an analysis of the platform’s DeFi smart contracts revealed that this was the case. The contract diverted investor funds to previous investors when they purchased a “slot” on the platform.

Attorney Natalie Wight said the indictment was the “result of a rigorous investigation that spent months piecing together the systematic theft of hundreds of millions of dollars.”

DeFi is Easy Prey

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

Meanwhile, Homeland Security Investigations (HSI) Special Agent Ivan Arvelo commented:

“These individuals are alleged to have used trendy technology and opaque language to swindle investors out of their hard-earned cash.”

Additionally, platforms in the DeFi sector often tout unrealistic gains and lure investors into fraudulent platforms.

According to DeFi Yield’s Rekt database, DeFi scams, hacks, and exploits have accounted for more than $75 billion in losses.

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