Source: United States Department of Justice Criminal Division
A federal grand jury in the District of Oregon returned an indictment today 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.
According to court documents, Vladimir Okhotnikov, aka Lado; Olena Oblamska, aka Lola Ferrari; Mikhail Sergeev, aka Mike Mooney, aka Gleb, aka Gleb Million; and Sergey Maslakov, all Russian nationals, allegedly touted 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 to the public through 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.
“Together with our partners, the department is committed to holding accountable fraudsters who cheat investors, including in the emerging DeFi space,” said Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division. “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.”
According to court documents, the defendants allegedly coded and deployed smart contracts that systematized their combined Ponzi-pyramid scheme on the Ethereum (ETH), Binance Smart Chain, and Tron blockchains. Analysis of the computer code underlying Forsage’s smart contracts allegedly revealed that, 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.
“Today’s indictment is the result of a rigorous investigation that spent months piecing together the systematic theft of hundreds of millions of dollars,” said U.S. Attorney Natalie Wight for the District of Oregon. “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. It is a privilege to work alongside the agents involved in these complex cases.”
As further alleged in the indictment, the defendants falsely promoted Forsage to the public as a legitimate, low-risk, and lucrative investment opportunity through Forsage’s website and various social-media platforms. However, blockchain analytics 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. Additionally, according to court documents, the defendants coded at least one of Forsage’s accounts (known as the “xGold” smart contract on the Ethereum blockchain) in a way that fraudulently siphoned investors’ funds out of the Forsage investment network and into cryptocurrency accounts under the founders’ control, which was contrary to representations made to Forsage investors that “100% of the [Forsage] income goes directly and transparently to the members of the project with zero risk.”
“While advancements in the virtual asset ecosystem bring new opportunities to investors, criminals are also finding new ways to orchestrate illicit schemes,” said Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division. “The FBI remains committed to working alongside our domestic and international law enforcement partners to investigate and pursue subjects who orchestrate these scams and attempt to defraud investors.”
“Technology is always changing and scams and swindles evolve alongside it,” said Inspector in Charge Eric Shen of the U.S. Postal Inspection Service (USPIS), Criminal Investigations Group. “The U.S. Postal Inspection Service is committed to investigating those who engage in schemes involving cryptocurrency investment fraud, which can cause significant financial harm to unsuspecting victims. We urge individuals to be cautious when considering investments and to always do their due diligence before providing money or personal information to any individual or organization.”
“These individuals are alleged to have used trendy technology and opaque language to swindle investors out of their hard-earned cash,” said Special Agent in Charge Ivan J. Arvelo of Homeland Security Investigations (HSI) 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 and with the collaboration amongst all our partners, we’re able to see through the phony promises and bring the schemes to light. HSI is committed to being at the forefront of financial investigations, using the full extent of our investigative capabilities to track down criminals no matter what new tricks they use.”
Okhotnikov, Oblamska, Sergeev, and Maslakov are each charged with conspiracy to commit wire fraud. If convicted, the defendants face a maximum penalty of 20 years in prison.
The FBI Portland Field Office, USPIS, and HSI New York’s El Dorado Task Force are investigating the case.
Trial Attorneys Sara Hallmark and Tian Huang of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Quinn Harrington and Meredith Bateman for the District of Oregon are prosecuting the case.
All investor victims of the Forsage scheme are encouraged to visit the webpage www.justice.gov/criminal-vns/case/united-states-v-vladimir-okhotnikov-et-al to identify themselves as potential victims and obtain more information on their rights as victims, including the ability to submit a victim impact statement.
An indictment is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.