Crypto: Vitalik Buterin slams ethereum-based ‘Ponzi scheme’ Forsage

·3 min read
LONDON, ENGLAND - DECEMBER 08:  Founder of Ethereum Vitalik Buterin during TechCrunch Disrupt London 2015 - Day 2 at Copper Box Arena on December 8, 2015 in London, England.  (Photo by John Phillips/Getty Images for TechCrunch)
Ethereum founder Vitalik Buterin hit out at Forsage, which has been accused of running a fraudulent pyramid and Ponzi scheme since early 2020. Photo: John Phillips/Getty Images for TechCrunch

Ethereum's Vitalik Buterin has asked people to "call out scammers" operating within the cryptocurrency sector after the US Securities and Exchange Commission (SEC) charged an ethereum-based crypto firm with being a "fraudulent crypto pyramid and Ponzi scheme".

The ethereum co-founder urged crypto platform to "please leave and don't pollute the ethereum ecosystem".

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Buterin's Twitter outburst was in reference to a recent SEC charge against Forsage, which has been accused of running a fraudulent pyramid and Ponzi scheme since early 2020.

Forsage calls itself a 'smart contract' crypto earnings platform, but its activities caught the attention of the SEC.

The SEC said Forsage raised more than $300m (£244m) from investors around the world, including in the US via their website, and that the group that runs the crypto-enterprise acted in a fraudulent way.

Read more: Web3: Is .eth the new .com?

The allegation is that Forsage has been operating as a pyramid scheme since its launch in January 2020 because investors earned profits by recruiting others into the scheme.

The SEC said that the group also allegedly used assets from new investors to pay earlier investors, a process typical of a Ponzi structure.

Forsage had been ordered to "cease-and-desist actions" by the Securities and Exchange Commission of the Philippines in September 2020 and by the Montana Commissioner of Securities and Insurance in March 2021.

SEC Crypto Assets and Cyber Unit acting chief Carolyn Welshhans said: “Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors.

“Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.”

However, the crypto-firm continued to promote the scheme up to the time of the SEC charges on Monday.

This led to an outburst on Tuesday by Buterin, who responded to the activities of Forsage and tweeted: "Call out scammers. You get hate in the moment, but time vindicates you.

"Even if you're some CEO with a 'reputation' and need for 'professionalism', do it anyway and be savage.

"People look up to you and your warning will be taken seriously."

In an earlier tweet concerning Forsage and the SEC investigation, Buterin stated that the US regulatory body is against Forsage because they are "deceitful".

Buterin added: "Most users of such projects will not make money, but will lose a lot of money.

"This kind of project relies on more and more people coming in every day to pay previous participants, when new participants are gone, most users lose everything they invested.

"Please leave and don't pollute the Ethereum ecosystem in the future, thank you!"

Ethereum's (USD-ETH) Vitalik Buterin has been outspoken on a number of points lately.

Last week the Ethereum creator made a suggestion that Facebook's (META) Metaverse attempt would fail.

In a tweet, he announced that "the 'metaverse' is going to happen but I don't think any of the existing corporate attempts to intentionally create the metaverse are going anywhere".

Facebook lost $2.8bn in the last quarter on their Meta concept.

Mark Zuckerberg's company lost more $10bn last year in the research and development of their metaverse concept.

Many jobs that are involved in metaverse concepts are being discontinued, and metaverse-based cryptocurrency tokens have shed a large portion of their value since the beginning of 2020.

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