The Securities and Exchange Commission (SEC) has recently charged 11 individuals for their roles in creating and promoting a crypto pyramid scheme after raising more than US$300 million from investors. With the rising popularity of the crypto market, there is an intensive rise in the number of crypto scams. The scheme is known as Forsage, which claimed to be a decentralized smart contract platform and enabled millions of retail investors to enter into transactions through smart contracts that operated on the Ethereum, Tron, and Binance blockchains.
The decentralized finance ecosystem and initial coin offerings have contributed thoroughly to Ethereum's growth in recent weeks. The Forsage crypto scam indicates a strategy that cryptocurrency users are now extensively debating. Generally, a crypto pyramid scheme is a type of financial fraud where top-level crypto scammers enlist and benefit from a growing base of newly deceived members. Whereas, a Ponzi scheme only demands initial payments from investors, with promises to return later.
Based on SEC's formal complaint, apparently, Forsage aggressively promoted its smart contracts through online promotions and new investment platforms, while it did not really sell any of its consumable products. The complaint also states that the primary way for investors to make money from Forsage was to recruit others in the scheme. In a statement, the SEC added that Forsage operated in a typical Ponzi scam infrastructure, it also used assets from new investors to pay the earlier ones. Four out of the eleven individuals who are charged by the SEC were founders of Forsage. The legal institution has also charged three US-based promoters who endorsed Forsage on their social media platforms.
Despite market fluctuations and uncertainty around its regulatory framework, cryptocurrencies continue to fascinate investors. The number of crypto users and traders keeps increasing, and so does the number of crypto scams and crypto pyramid schemes. These frauds are not just financial risks, they also extend to cyber frauds, involving highly skilled scammers. Before entering the market, investors should be careful about considering these risks and investing carefully.
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Disclaimer: Analytics Insight does not provide financial advice or guidance. Also note that the cryptocurrencies mentioned/listed on the website could potentially be scams, i.e. designed to induce you to invest financial resources that may be lost forever and not be recoverable once investments are made. You are responsible for conducting your own research (DYOR) before making any investments. Read more here.