Ethereum dApp Forsage has been labelled a possible ponzi scheme by the Philippines Securities and Exchange Commission (SEC), and is actively trying to track down the developers.
Forsage, which is currently the second most used dApp on the Ethereum network, has been warned against by the SEC, which explicitly advised users to stop using it immediately, and demanded the owner to register the dApp with the commission.
Forsage claims to be a ‘fully decentralized matrix marketing project,’ but the SEC and many users are starting to think it a ponzi scheme.
It has all the hallmarks of a ponzi scheme in which the person at the top of the matrix profits, and one which depends on the influx of new members to keep it going.
It has also been earmarked as a high-risk dApp by dAppRadar, and according to data from the dApp site, its volume has dropped 65% since running into trouble with the SEC.
What Is Forsage?
Forsage is a dApp built on Ethereum, and is a ‘marketing project’ in which users profit by encouraging more users to invest in multi-level ‘slots’.
Forsage’s slots are built into Ethereum smart contracts, which the investor will buy, sit back and hope it gains profit. The way it will do this is by introducing new members to buy the slots.
These slots get twice as expensive as the previous slots and the value generated siphons back to the top of the matrix.
The Philippines SEC advisory notice stated, “Based on numerous reports by the commission, the entity operating under the name Forsage, headed by Lado Okhotnikkow, is found to be engaging in investments-taking activities in the Philippines which is not authorized by the commission.’
Forsage Ignores The SEC
The demand by the SEC fell on deaf ears, as the Ethereum dApp owners refused to comply. The commission has said it has been contacted by Forsage, but the team were not helpful.
‘Forsage claims that its program will continue to function even if its website “www.forsage.io” is closed for any reason,’ said the SEC. ‘It even implied that the Government cannot shut it down because it is decentralized and thus free from any authority.’
This was verified by programmer Philipe Castonguay, who examined the Forsage code and agreed that the smart contract couldn’t be stopped even if the website was disbanded.
The SEC has no jurisdiction to shut down Forsage either, and with the developers of Forsage likely incognito, it might be difficult for the commission to track them down.
They could contact cryptocurrency exchanges and ask for an audit of transactions connected to any Ethereum address the Forsage developers are using.
This is arguably the best way the commission has of discovering the people behind the ponzi scheme. But even still, if they’re not based in the Phillippines, will they have any clout to serve a penalty if they do catch the perpetrators?
Ponzi Schemes An Innevitable Part Of Crypto
It’s unfortunate that ponzi schemes exist, in the legacy world and in crypto. Many fall for them because of the seemingly amazing way to profit, but the fact is only a few make the big gains.
Forsage isn’t the first and it certainly won’t be the last ponzi scheme built on Ethereum. And while they give the space a bad name, it’s inevitable that they will be built on immutable blockchains.
The thing the developers at Forsage should understand is that all ETH transactions are traceable, and although they might make a fair bit now, they will get caught.
Author: Tommy Limpitlaw