U.S. DOJ charges four Russian-nationals for role in DeFi Ponzi Scheme Forsage

TRM InsightsInsights
U.S. DOJ charges four Russian-nationals for role in DeFi Ponzi Scheme Forsage

In February a federal grand jury in the District of Oregon returned an indictment charging four founders of Forsage, a purportedly decentralized finance (DeFi) cryptocurrency investment platform, for their roles in a global Ponzi and pyramid scheme that raised approximately $340 million from victim-investors. This is the first time law enforcement has brought criminal charges associated with a DeFi Ponzi scheme.

According to the indictment, the four founders, all Russian nationals, marketed Forsage as a decentralized matrix project based on network marketing and “smart contracts,” which are self-executing contracts on the blockchain. As alleged in the indictment, the defendants aggressively promoted Forsage via social media as a legitimate and lucrative business opportunity, but in reality, the defendants operated Forsage as a Ponzi and pyramid investment scheme that took in approximately $340 million from victim-investors around the world. 

The indictment alleges that the defendants coded and deployed smart contracts that systematized their combined Ponzi-pyramid scheme on the Ethereum (ETH), Binance Smart Chain, and Tron blockchains. Consistent with a Ponzi scheme, as soon as an investor invested in Forsage by purchasing a “slot” in a Forsage smart contract, the smart contract automatically diverted the investor’s funds to other Forsage investors, such that earlier investors were paid with funds from later investors. What makes a DeFi Ponzi scheme so dangerous is this ability to automate the scheme through the use of software in order to move funds faster.

According to court documents, blockchain intelligence confirmed that over 80% of Forsage investors received fewer ETH back than they had invested in Forsage’s Ethereum program, with over 50% of investors never receiving a single payout, and the defendants had at least one account to automatically siphon investor funds into wallets controlled by the defendants.

“As the indictment alleges, all they were doing was running a classic Ponzi scheme,” said Special Agent in Charge Ivan J. Arvelo of Homeland Security Investigations (HSI) New York, at the time of the indictment. “The technology may change, but the scams remain the same and with the collaboration amongst all our partners, we’re able to see through the phony promises and bring the schemes to light.”

And the case was indeed an example of cooperation. The FBI Portland Field Office together with the U.S. Postal Inspection Service, and HSI New York’s El Dorado Task Force are investigating and trial Attorneys from DOJ’s Fraud Section and Assistant U.S. Attorneys for the District of Oregon are prosecuting the case. Last year the SEC brought charges against 11 individuals for their involvement in the Forsage scheme.

This is some text inside of a div block.
Subscribe and stay up to date with our insights

Access our coverage of TRON, Solana and 23 other blockchains

Fill out the form to speak with our team about investigative professional services.

Services of interest
Transaction Monitoring/Wallet Screening
Training Services
Training Services
By clicking the button below, you agree to the TRM Labs Privacy Policy.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.