SEC Issues Advisory on ‘Ethereum’-Based Cryptocurrency Program Forsage

The Securities and Exchange Commission (SEC) issued an advisory on June 30, 2020, on Forsage, a ‘cryptocurrency’ platform making rounds on social media touting to provide “a long-term active and passive income to investors.”

Forsage

Forsage also presents itself as creating “The world’s first 100% decentralized” smart contract technology, which “facilitates peer-to-peer commission payments between its program participants,” and is based on the Ethereum blockchain, according to their website.

The Forsage website also states that they’ve “deployed a self-executing smart contract on the Ethereum Blockchain that exists in perpetuity and cannot be modified by any entity.”

The smart contract also supposedly offers participants “the ability to directly engage in personal and business transactions.” through the Ethereum Blockchain Matrix Project.

Ponzi Scheme

SEC has taken notice of the rising popularity of Forsage and was quick to point out several red-flags in the said program.

In its advisory, SEC has named “Lado Okhotnikov” as the individual who heads and owns the program. According to his Facebook account, Okhotnikov claims he resides in Moscow, Russia, but recent posts in his said account has geotagging located in Tblisi, Georgia–bordered by Russia in the north.

This directly contradicts claims by Forsage that the program “has no leaders or admins” and will continue to function even in the event that its website closes for any reason.

The X3 and X4 plans that are at the core of the program’s operations greatly “depends on the number of referrals and/or membership fees gathered while passive income is acquired through spillovers,” according to the SEC advisory.

SEC also challenged the claims of Forsage on sustainability due how “its whole system depends entirely on the new investors that will be lured in.”

Once no more investors are lured, the sustainability of the program ends.

Moreover, SEC has tagged Forsage as having clear indication of being a “Ponzi Scheme” wherein new investments from more recent lures are continuously used to pay “fake profits” of prior investors and is “designed mainly to favor its top recruiters and prior risk takers and is detrimental to subsequent members in case of scarcity of new investors.”

Forsage adds to the list of cryptocurrency ponzi schemes that includes OneCoin and Bitconnect, with the latter two having proven to be billion-dollar scams.

Liabilities

All who act as “salesmen, brokers, dealers or agents” of unauthorized entities such as Forsage may be criminally prosecuted and penalized with a maximum fine of Five Million pesos (P5,000,000.00) or a penalty of Twenty-one (21) years of imprisonment or both pursuant to Sections 28 and 73 of the SRC, according to SEC.

The same penalties and cases may be filed against those who actively invite or recruit others “to join or invest in such venture or offer investment contracts or securities”

The Bayanihan to Heal as One Act (Republic Act No. 11469) also punishes people who are “participating in cyber incidents that make use or take advantage of the current crisis situation to prey on the public through scams, phishing, fraudulent emails, or other similar acts during the term of its effectivity.” (GFB)

See the full SEC advisory here.