Early this week, the Securities and Exchange Commission (SEC) announced that it charged 11 individuals for their roles in creating and promoting Forsage, a purported fraudulent crypto pyramid and Ponzi scheme, which raised more than $300 million from millions of retail investors worldwide, including in the United States. Those charged include Forage's four founders (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, and several members of "Crypto Crusaders," a promotional group. "As the complaint alleges, Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors," said Carolyn Welshhans, acting chief of the SEC's Crypto Assets and Cyber Unit. "Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains," said Welshhans.
The U.S. Department of Justice (DOJ) also made an announcement this week, stating that two Californians were sentenced to more than a year in federal prison for conning more than 2,000 investors into purchasing DROPS, a cryptocurrency that purportedly provided exclusive access to a profitable trading program. According to a DOJ press release, most of the $1.9 million raised was used for the defendants' personal gain. In sentencing memoranda, prosecutors argued that the defendants "caused significant financial harm to an extremely large number of victims and entailed efforts to derail law enforcement's attempts to root out and address wrongdoing."
On Monday, the New York State Department of Financial Services (DFS) issued a consent order imposing a $30 million fine on a major U.S. cryptocurrency exchange and trading platform for allegedly failing to comply with New York anti-money laundering and cybersecurity laws and regulations. The case marks the DFS's first enforcement action in the cryptocurrency sector. On the same day, the New York attorney general issued an investor alert urging any New Yorker deceived or affected by the cryptocurrency crash to contact the Office of the Attorney General (OAG). The alert warns that many high-profile cryptocurrency businesses have frozen customer withdrawals, announced mass layoffs or filed for bankruptcy, while investors have been left in financial ruin. The alert also encourages workers in the cryptocurrency industry who may have witnessed misconduct or fraud to file a whistleblower complaint with the OAG.
For more information, please refer to the following links:
- SEC Charges Eleven Individuals in $300 Million Crypto Pyramid Scheme
- Two Orange County Men Sentenced to Federal Prison for Conning Investors Out of $1.9 Million Through Cryptocurrency Offering
- DFS SUPERINTENDENT HARRIS ANNOUNCES $30 MILLION PENALTY ON ROBINHOOD CRYPTO FOR SIGNIFICANT ANTI-MONEY LAUNDERING, CYBERSECURITY & CONSUMER PROTECTION VIOLATIONS
- INVESTOR ALERT: Attorney General James Urges New Yorkers Deceived by Crypto Platforms to Report Concerns to OAG
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