A federal grand jury in Oregon on Wednesday indicted four founders of Forsage, a web-based cryptocurrency platform, on accusations they ran a pyramid scheme that raised about $340 million from investors worldwide, including local victims.
Four Russian nationals are named as the defendants and remain out of custody.
The indictment is the latest effort to halt the alleged fraud and follows a complaint last summer by the U.S. Securities and Exchange Commission after a cease-and-desist order was unsuccessful, according to federal court records.
The four defendants are accused of aggressively promoting Forsage to the public through social media as a legitimate and lucrative business opportunity.
They operated a website that allowed millions of retail investors to enter into smart contracts that operated on blockchains called Ethereum, Tron and Binance, according to federal prosecutors.
A smart contract is a computer program intended to automatically execute, control or document events and actions according to the terms of an agreement. A blockchain is a public ledger that records incoming and outgoing cryptocurrency transactions.
Yet when an investor put money into Forsage by purchasing a “slot” in a Forsage smart contract, the contract automatically diverted the investor’s money to earlier Forsage investors in a typical Ponzi scheme, according to the indictment.
The indictment alleges the fraud occurred for more than two years and investors earned profits by recruiting others to invest.
More than half of the investors, however, never received a single payout.
The defendants named in the indictment are the alleged Forage founders Vladimir Okhotnikov, also known as Lado; Olena Oblamska, known as Lola Ferrari; Mikhail Sergeev, also known as Mike Mooney; Gleb Million and Sergey Maslakov.
They’re each charged with conspiracy to commit wire fraud.
“Bringing charges against foreign actors who used new technology to commit fraud in an emerging financial market is a complicated endeavor only possible with the full and complete coordination of multiple law enforcement agencies,” Oregon’s U.S. Attorney Natalie Wight said in a statement.
Portland FBI agents have worked on the case with the U.S. Postal Inspection Service and New York-based federal agents from Homeland Security Investigations.
“These individuals are alleged to have used trendy technology and opaque language to swindle investors out of their hard-earned cash,” said Ivan J. Arvelo, special agent in charge of Homeland Security Investigations in New York. “But, as the indictment alleges, all they were doing was running a classic Ponzi scheme. The technology may change, but the scams remain the same.”
The Securities and Exchange Commission has alleged that Okhotnikov is “the face” of the Forsage operation, hosting many of its YouTube videos and appearing in interviews with promoters, according to its complaint.
On Okhotnikov’s behalf, a lawyer, James G. Lundy, has argued in that case that U.S. courts lack authority over Okhotnikov because he’s a foreign national and has never been to the United States, according to a filing in federal court in Illinois.
According to Wednesday’s indictment, Okhotnikov also published a video on YouTube on Aug. 9, denying the SEC charges. He claimed there were “no victims” of Forsage and that no participants “found themselves in a situation of financial pyramids.” Despite appearing in numerous promotional videos published on U.S. platforms promoting the Forsage scheme, Okhotnikov claimed he had “in no way touched the jurisdiction of the United States,” according to the indictment.
The indictment further quotes Okhotnikov, who claimed that Forsage is not a scam because “real scams can never win people’s hearts.”
— Maxine Bernstein
Email mbernstein@oregonian.com; 503-221-8212
Follow on Twitter @maxoregonian
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