Two ‘Crypto Crusaders’ settle with SEC over alleged $300M Ponzi scheme


Two of 11 defendants charged with running a $300 million cryptocurrency-based Ponzi scheme have agreed to settle with the Securities and Exchange Commission.

The case concerns the four founders of a cryptocurrency company called Forsage, as well as a group called the “Crypto Crusaders” who heavily promoted the site. The two defendants who settled, Samuel Ellis and Sarah Theissen, were among this latter group.

The SEC, in its complaint, said that Forsage is “a textbook pyramid and Ponzi scheme” as it did not sell or even purport to sell any actual consumable product to bona fide retail customers since it first began operating in early 2020. The SEC said that the company had no apparent sources of revenue save what funds it received from investors. The primary way for these investors to make money was to recruit others into the scheme. They did so through specially designed crypto-asset wallets that gave the investor the right to earn compensation from others whom the investor recruited, as well as “spillover” compensation from the larger community of investors. This means, though, that all payouts to earlier investors were made with the funds received from later investors, which is basically the definition of a Ponzi scheme.

The company had previously been served cease-and-desist actions in September 2020 by financial regulators in the Philippines, and again in March 2021 by financial authorities in Montana. Despite this, the defendants denied the claims in YouTube videos and other communications.

“As the complaint alleges, Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors,” said Carolyn Welshhans, acting chief of the SEC’s Crypto Assets and Cyber Unit. “Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.”

Also charged have been the four founders of Forsage — Russian nationals operating in various parts of the world — as well as other members of the promotions team. The investigation into these individuals remains ongoing. Meanwhile, Ellis and Theissen agreed to settle the charges and to be permanently enjoined from future violations of the charged provisions and certain other activity. Additionally, Ellis agreed to pay disgorgement and civil penalties, and Theissen will be required to pay disgorgement and civil penalties as determined by the court. Both settlements are subject to court approval.

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