Forsage Ponzi Scheme Case: The Code Allegedly Paid the People Who Wrote It

In the Forsage Ponzi scheme case, the Securities and Exchange Commission alleged that the operation raised more than $300 million by selling positions in smart contracts and using new investors’ money to pay earlier participants. It alleged that Forsage sold the right to receive other investors’ payments while offering no consumable product to retail customers. For someone who worked on the code, recruitment system or promotional videos, the important connection is between the income people were promised and the rules that actually sent their money elsewhere.

Forsage launched its website in January 2020 and promoted a decentralized finance business built around network marketing. This page follows its slot purchases, payment routing and the separate SEC civil and Justice Department criminal allegations. Our broader coverage of crypto and digital asset Ponzi schemes compares the investment promises and payment sources across other operations.

How Did Forsage’s Smart Contracts Move the Money?

Forsage’s smart contracts allegedly routed a new investor’s payment to other participants as soon as it arrived. In its complaint describing the compensation system, the SEC said investors bought slots using cryptocurrency on Ethereum, Tron and Binance. A slot gave its buyer the opportunity to earn payments from later participants, including people recruited by others in the network.

According to the complaint’s account of Forsage’s marketing materials, the original Ethereum x3 and x4 contracts each offered 12 slots, with the price doubling at each successive slot. In x3, the contract sent the first two payments in a cycle to the investor. The third payment went to the investor’s recruiter, called the upline, and reopened the slot for another cycle.

The Securities and Exchange Commission also described spillovers, payments that could reach someone who had not personally recruited the buyer. A recruit who bought a higher slot could overtake the person who recruited them: if that recruiter had not purchased the same slot, the payment skipped to someone farther up who had. Buying more slots therefore meant buying access to more of the payments coming from below. The next purchase kept the compensation system moving.

That is how the alleged pyramid recruitment structure and Ponzi payment structure fit together. Recruitment supplied the money, and later investors funded earlier investors’ receipts. The Commission alleged that Forsage had no apparent revenue source outside its investors. In that account, the Ponzi scheme was in the source of the payments, even when software handled the transfers.

What Advantage Did the Indictment Allege for Forsage’s Founders?

The criminal indictment alleged that the founders controlled Forsage ID 1, the position at the top of the Ethereum pyramid. That position earned more Ether than any other identification number and automatically divided incoming funds among four wallets, which then sent funds to the founders’ personal cryptocurrency wallets. The indictment also alleged that ID 1 could participate fully without investing and became the upline for anyone who registered without another promoter’s referral link.

The founders nevertheless advertised that members were on “equal footing” and that “everyone has the same opportunities,” according to the indictment’s account of the pitch. We see the absurdity in the indictment’s account: the top position came with recruits and no entry bill.

What Did Forsage Send Outside the Network?

The Securities and Exchange Commission alleged that the Ethereum xGold contract diverted investor payments to a wallet with no Forsage investor ID. That wallet had never invested in xGold, yet the contract sent it money that Forsage’s own representations said belonged to participants. The complaint put the website’s promise beside the alleged diversion:

The Commission alleged that all funds invested in the early Ethereum xGold transactions went to that non-investor wallet. The criminal indictment separately alleged that xGold siphoned funds into cryptocurrency accounts controlled by the defendants. A promise about where the money went could be compared with the destination written into the code.

What Happened to Most Forsage Investors?

The criminal indictment alleged that more than 80% of investors in Forsage’s Ethereum program received less Ether than they put in, and more than half never received a payout. The Securities and Exchange Commission’s complaint alleged that the founders’ receipts reached at least $4,803,943 jointly by April 25, 2022, valued when received.

The complaint described the same divide through Forsage’s own back-office information. It alleged that most investors added beneath ID 1 from January 2021 had made no profit and recruited no partners, while their upline received their payments. Earlier participants’ success was the sales pitch for later participants’ entry.

According to the Securities and Exchange Commission, new slot sales on Ethereum and Tron had largely dried up by early 2021. A founder blamed transaction difficulties and fees while announcing a Binance program, which the Commission alleged was an effort to keep money flowing to the defendants. A new blockchain gave promoters a new launch to sell while preserving the recruitment-based compensation model.

Who Promoted Forsage, and Where Did It Spread?

The Securities and Exchange Commission’s case reached the people selling Forsage as well as the people behind its contracts. Its announcement of the civil charges identified four founders, three U.S.-based promoters engaged by them, and members of the Crypto Crusaders promotional group.

The Commission identified the founders’ last known residences as Russia, the Republic of Georgia and Indonesia. It described the Crypto Crusaders as operating across at least five U.S. states and the investors as worldwide, including in the United States. Those are different parts of the cross-border Ponzi scheme picture: who controlled the operation, who promoted it and who supplied the money.

The complaint alleged that Forsage’s founders controlled the website, back office, training materials and customer-support infrastructure. They offered multilingual videos, tutorials and testimonials through YouTube and other social platforms. A promoter also operated a Telegram system that automatically assigned recruits to investors’ downlines. An insider who worked on those assignments could connect the public promise of passive income with the recruiting work needed to fund it.

Regulator Warnings Became a Marketing Problem

The Securities and Exchange Commission complaint alleged that the founders and promoters kept selling Forsage after regulators challenged it. The Philippines’ Securities and Exchange Commission issued a public notice and concluded that Forsage operated a fraudulent scheme involving unregistered securities. Montana’s Commissioner of Securities and Insurance issued a cease-and-desist order.

The complaint described a Crypto Crusaders promoter advising viewers to leave Forsage’s name out of Facebook posts because people would search for it and find allegations that it was a Ponzi scheme. Another webinar dismissed Montana’s action, and the Commission alleged that the group subsequently removed promotional videos or made them private. For someone who handled marketing, the versions, publication decisions and instructions behind those changes are part of the story. The search results had become the problem to solve.

What Did the SEC and the Justice Department Charge?

In 2022, the Securities and Exchange Commission charged 11 people over Forsage. It alleged securities fraud and unregistered securities sales through the slot investments. The complaint treated the right to receive recruitment and spillover payments as an investment sold to the public, with returns depending on the work of founders, promoters and other participants. Two promoters agreed to civil settlements requiring court approval, including repayment and civil penalties.

The Justice Department’s 2023 criminal indictment charged the four founders with conspiracy to commit wire fraud and alleged that Forsage took in approximately $340 million from investors worldwide. It alleged that they coded the payment structure, promoted false claims about returns and concealed where investor money went. The Justice Department’s announcement of the indictment identified the FBI Portland Field Office, the U.S. Postal Inspection Service and Homeland Security Investigations New York’s El Dorado Task Force as the investigating agencies.

What Could an Insider Add to the Forsage Payment Trail?

An insider can connect a wallet or contract rule to the people who selected it and the promise used to attract investors. The Securities and Exchange Commission complaint described back-office records showing investor IDs, registration dates, wallet addresses, purchased slots, reported earnings and recruits. Those details connect the payment machinery to the recruitment network.

A developer may know why a destination wallet was added or who approved the payment logic. Someone in promotion or support may hold instructions about income claims, downline placement or responses to regulator warnings. We work with you to connect that knowledge to the transactions and representations it explains. If you are considering reporting a suspected Ponzi scheme, that connection is where our work together begins.

An SEC whistleblower can earn 10% to 30% of sanctions collected when a qualifying action exceeds $1 million in monetary sanctions. For fraud against the government, a whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. We assess the conduct you know and build your case for the program that fits it.

Your Knowledge of the Forsage Code and Pitch

If you know who chose the payout rules, controlled the destination wallets or approved the Forsage recruitment pitch, speak with our whistleblower experts. We build the case with you around the connection between the code, the money and the decisions behind the promises, and bring in securities fraud whistleblower lawyers who understand cryptocurrency evidence. From explaining a hidden wallet to challenging the recruitment pitch, we stay beside you through the case.