Russians accused of using DeFi platform for $340 million Ponzi scheme

Four Russian nationals were indicted by a federal grand jury in Oregon this week for their involvement in a decentralized finance (DeFi) cryptocurrency investment platform that the Justice Department believes was a Ponzi scheme. 

Vladimir Okhotnikov, Olena Oblamska, Mikhail Sergeev and Sergey Maslakov are accused of running Forsage, a DeFi project that they marketed and raised $340 million for through investors across the globe. 

According to the DOJ, the four built measures into the platform’s code that diverted funds from the most recent investors to earlier investors — the hallmark of all Ponzi and pyramid schemes.

The Justice Department did not respond to requests for comment about where the four are based and whether there is any possibility of their arrest.

DeFi platforms are entirely online and provide services and products outside the traditional financial system. Forsage operated on the Ethereum (ETH), Binance Smart Chain and Tron blockchains.

Analysis of the platform revealed that more than 80% of investors got less cryptocurrency back than they put in and more than half never got any funds back.

Homeland Security Investigations (HSI) special agent in charge Ivan Arvelo said the four used “trendy technology and opaque language to swindle investors” while “running a classic Ponzi scheme.”

“The technology may change, but the scams remain the same and with the collaboration amongst all our partners, we’re able to see through the phony promises and bring the schemes to light,” Arvelo said. 

Prosecutors added that the defendants allegedly “coded at least one of Forsage’s accounts (known as the ‘xGold’ smart contract on the Ethereum blockchain) in a way that fraudulently siphoned investors’ funds out of the Forsage investment network and into cryptocurrency accounts under the founders’ control, which was contrary to representations made to Forsage investors that ‘100% of the [Forsage] income goes directly and transparently to the members of the project with zero risk.’”

Okhotnikov, Oblamska, Sergeev and Maslakov were charged with conspiracy to commit wire fraud and are facing maximum sentences of 20 years in prison.

The DOJ urged alleged victims of the scheme to continue contacting the government and coming forward with information.

Assistant Attorney General Kenneth Polite, Jr. said the case was an example of the Justice Department’s growing use of blockchain analysis to “uncover sophisticated frauds involving cryptocurrency and digital assets.”

“Bringing charges against foreign actors who used new technology to commit fraud in an emerging financial market is a complicated endeavor only possible with the full and complete coordination of multiple law enforcement agencies,” U.S. Attorney Natalie Wight said. 

The Justice Department worked with the FBI, HSI and the U.S. Postal Inspection Service on the case. 

In recent months the DOJ has shown an interest in prosecuting blockchain and cryptocurrency-focused crimes. Prosecutors made waves in December when they charged Avraham Eisenberg with commodities fraud and commodities manipulation for stealing $110 million from crypto platform Mango Markets.