Centralized exchanges are under threat of being reprimanded by regulators in the US. When it appeared that things would be limited to the exchange sector, it was discovered that another sector was preparing for a serious allegation: decentralized finance (DeFi).
In light of recent events, the US Fed has accused four Russians of operating a Ponzi scheme on the blockchains of BNB, Ethereum, and Tron. Around $340 million is the estimated value of the fraudulent scam if the reports are to be believed. It ran on a straightforward, pyramid-scheme-like process.
Investors are encouraged to bring in more inventors, and then the funds from new investors are utilized to pay off old investors. Alleged to be a systematic Ponzi pyramid scheme, prosecutors have said that four Russians purposely coded and deployed such a smart contract. Their names have been shared: Olena Oblamska, Vladimir Okhotnikov, Sergey Maslakov, and Mikhail Sergeev.
It has also been revealed that 80% of the Forsage investors received fewer ETH, while 50% never received a single payout. Meanwhile, according to a statement published by the US Justice Department, the defendants have been charged with conspiracy to commit wire fraud.
The Department believes that almost the entire fund has been directed to members whose projects have zero risk, despite promoting the platform as legitimate and low-risk.
It would all begin with users purchasing a block in the smart contract for Forsage. This would be automatically followed by the diversion of funds to other investors, signaling a classic model for pyramid Ponzi schemes.
This has only given the department a chance to further widen its investigation into the cryptosphere. Their hands were already full with centralized exchanges like FTX, and now DeFi comes as an added troublesome segment. The collapse of FTX has, as a matter of fact, brought a lot of trouble to the global crypto space. Regulators are strengthening their hold over the industry to ensure that customers have their funds secured for a situation where the platforms begin reporting a decline in their operations.
Also, they are expanding the coverage to ensure that the partnerships in the industry are reliable instead of being there for the sake of being there.
A fraud worth $340 million raises more questions about how decentralized these platforms should be or how much liberty they should be given. Supervision now becomes necessary to protect the interests of retail investors. It has been claimed that the Forsage founders operated a Ponzi pyramid scheme. If this were to be confirmed, the platform would lose its standing in the community and its ability to work with the government. The federal grand jury in Oregon is now handling the matter.
The decentralized cryptocurrency network is accused of defrauding its investors, and as the case develops, this will only worsen.