`
`Case: 1:22-cv-03978 Document #: 1 Filed: 08/01/22 Page 1 of 49 PageID #:1
`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
`
`
`
`
`
`
`
`
`
`
`
`Plaintiff,
`
`SECURITIES AND EXCHANGE COMMISSION
`
`
`
`v.
`
`VLADIMIR OKHOTNIKOV,
`JANE DOE a/k/a LOLA FERRARI,
`MIKAIL SERGEEV,
`SERGEY MASLAKOV,
`SAMUEL D. ELLIS,
`MARK F. HAMLIN,
`SARAH L. THEISSEN,
`CARLOS L. MARTINEZ,
`RONALD R. DEERING,
`CHERI BETH BOWEN, and
`ALISHA R. SHEPPERD,
`
`Defendants.
`
`
`
`__________________________________________
`
`
`
`
`
`
`
`
`
`
`Case No. _____________
`
`JURY TRIAL DEMANDED
`
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`
`COMPLAINT
`
`Plaintiff Securities and Exchange Commission alleges:
`
`I.
`
`INTRODUCTION
`
`1.
`
`The Commission brings this action to enjoin Defendants from violating the federal
`
`securities laws and for other relief. From at least January 31, 2020 through the present,
`
`Defendants Vladimir “Lado” Okhotnikov (“Okhotnikov”), Jane Doe a/k/a Lola Ferrari
`
`(“Ferrari”), Mikail “Mike” Sergeev (“Sergeev”), and Sergey Maslakov (“Maslakov”)
`
`(collectively, the “Founders”) created, operated and maintained an online pyramid and Ponzi
`
`scheme through Forsage.io (“Forsage”), a website that allowed millions of retail investors in the
`
`
`
`- 1 -
`
`

`

`
`
`
`
`Case: 1:22-cv-03978 Document #: 1 Filed: 08/01/22 Page 2 of 49 PageID #:2
`
`United States and elsewhere to enter into transactions via smart contracts created by the Founders
`
`that operated on the Ethereum, Tron, and Binance blockchains. To date, these transactions have
`
`totaled over $300 million. The Founders perpetuated Forsage and its smart contracts through
`
`aggressive online promotions and continuous development of new investment platforms. During
`
`the relevant time period, the Founders raised funds from retail investors in the United States and
`
`across the world through the unregistered offer and sale of securities in Forsage. In connection
`
`with the offer and sale of those securities, the Founders engaged in a scheme to defraud investors
`
`and further engaged in practices that operated as a fraud or deceit upon those investors.
`
`2.
`
`During the same time period, the Founders engaged individuals in the United
`
`States – Defendants Samuel D. Ellis (“Ellis”), Mark F. Hamlin (“Hamlin”), and Sarah L. Theissen
`
`(“Theissen”) (collectively, the “Promoters”) – to promote Forsage on Forsage-hosted platforms,
`
`including the Forsage Official YouTube channel and Forsage’s education tool, the Forsage
`
`Academy. In doing so, the Promoters engaged in the unregistered offer and sale of securities in
`
`Forsage. In addition, by working with the Founders to promote Forsage in the United States, the
`
`Promoters engaged in a scheme to defraud investors and further engaged in practices that operated
`
`as a fraud or deceit upon those investors.
`
`3.
`
`From at least June 4, 2020 through the present, Defendants Theissen, Carlos L.
`
`Martinez (“Martinez”), Ronald R. Deering (“Deering”), Cheri Beth Bowen (“Bowen”), and
`
`Alisha R. Shepperd (“Shepperd”) (collectively, the “Crypto Crusaders”) led the largest Forsage
`
`promotional group in the United States. In doing so, the Crypto Crusaders engaged in the
`
`unregistered offer and sale of securities in Forsage. In addition, by promoting Forsage in the
`
`United States, the Crypto Crusaders engaged in a scheme to defraud investors and further engaged
`
`in practices that operated as a fraud or deceit upon those investors.
`
`- 2 -
`
`

`

`
`
`
`
`Case: 1:22-cv-03978 Document #: 1 Filed: 08/01/22 Page 3 of 49 PageID #:3
`
`4.
`
`Forsage is a textbook pyramid and Ponzi scheme. It did not sell or purport to sell
`
`any actual, consumable product to bona fide retail customers during the relevant time period and
`
`had no apparent source of revenue other than funds received from investors. The primary way
`
`for investors to make money from Forsage was to recruit others into the scheme. To participate,
`
`an investor created a crypto-asset wallet and then purchased “slots” in Forsage’s smart contracts,
`
`which gave the investor the right to earn compensation from others whom the investor recruited
`
`into the scheme (the “downlines”) and compensation from the larger Forsage community of
`
`investors in the form of profit sharing of payments known as “spillovers.” When an investor
`
`purchased a slot, a portion of that investment was directed to the persons who recruited the
`
`investor (the “uplines”) and the investor in turn became an upline to whomever the investor
`
`recruited. Thus, all payouts to earlier investors were made using funds received from later
`
`investors.
`
`5.
`
`During the relevant time period, Forsage operated on the Ethereum and Tron, and
`
`later the Binance, blockchains, using algorithmic contracts (“smart contracts”) to direct funds to
`
`an investor as additional investors were recruited into the scheme. The smart contracts allocated
`
`payments automatically to investors’ crypto-asset wallets, to which Forsage assigned sequential
`
`identification numbers (“Forsage ID”). The lower the Forsage ID, the earlier an investor joined
`
`Forsage.
`
`6.
`
`The Founders devised and controlled all essential operations of Forsage, including
`
`creation of the smart contracts; compensation plan; development of the Forsage website; the
`
`“back office” infrastructure; promotion of the enterprise; collection and distribution of payments
`
`to investors; design and launch of new investment platforms; and creation and maintenance of
`
`training and support tools, such as the Forsage Academy, Forsage Community, and Forsage
`
`- 3 -
`
`

`

`
`
`Case: 1:22-cv-03978 Document #: 1 Filed: 08/01/22 Page 4 of 49 PageID #:4
`
`Customer Care Center.
`
`7.
`
`In addition, the Founders coded one of Forsage’s smart contracts on the Ethereum
`
`blockchain (Forsage xGold) to divert a portion of investor funds to a crypto-asset wallet that was
`
`not associated with a Forsage ID assigned to any investor.
`
`8.
`
`When confronted with allegations that Forsage was operating as a pyramid
`
`scheme, the Founders, Promoters, and Crypto Crusaders expressly denied the allegations and
`
`falsely assured investors that Forsage was a legitimate operation.
`
`9.
`
`Investors’ slots in Forsage’s smart contracts, and the attendant right of investors
`
`to earn compensation from sales of those slots and profit sharing from spillover payments through
`
`those slots, were investment contracts constituting securities, the offer or sale of which was
`
`neither registered with the Commission, as required by the federal securities laws, nor exempt
`
`from registration. Investors made an investment of money – using Ethereum, Tron, or Binance
`
`tokens – in a common enterprise from which they were led to expect profits solely from the efforts
`
`of Defendants or third parties.
`
`10.
`
`As a result of the conduct alleged in this Complaint, Defendants violated Section
`
`5 of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. § 77e; Section 17(a) of the Securities
`
`Act, 15 U.S.C. § 77q(a); and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934
`
`(“Exchange Act”), 15 U.S.C. § 78j(b), 17 C.F.R. § 240.10b-5. Unless restrained and enjoined,
`
`Defendants are reasonably likely to continue to violate the federal securities laws.
`
`11.
`
`The Commission therefore respectfully requests the Court enter: (i) permanent
`
`injunctions restraining and enjoining Defendants from violating the federal securities laws, and
`
`restraining and enjoining Defendants from engaging in certain further conduct; (ii) an order
`
`directing Defendants to pay disgorgement with prejudgment interest; and (iii) an order directing
`
`
`
`- 4 -
`
`

`

`
`
`Case: 1:22-cv-03978 Document #: 1 Filed: 08/01/22 Page 5 of 49 PageID #:5
`
`Defendants to pay civil money penalties.
`
`II.
`
`DEFENDANTS
`
`A.
`
`The Founders
`
`12.
`
`Okhotnikov is a Russian national believed to reside in Tbilisi, Republic of
`
`Georgia. He is one of the co-founders of Forsage and “the face” of the operation, hosting many
`
`of its YouTube videos and appearing in interviews with lead promoters. Okhotnikov has prior
`
`experience participating in multilevel marketing (“MLM”) projects. Upon information and belief,
`
`he holds Forsage Ethereum IDs 1, 4, and 5, Forsage Tron ID 1, and Forsage BUSD ID 1, among
`
`others. In addition, the proceeds associated with Forsage Ethereum ID 1 were split equally into
`
`four “subwallets” as depicted by the graphic below. These subwallets are not affiliated with any
`
`Forsage Ethereum member IDs. On information and belief, Okhotnikov and the other three
`
`Founders have an interest in one or more of these “subwallets.”
`
`
`Ferrari, whose actual identity is currently unknown but who holds herself out to
`
`13.
`
`the public as “Lola Ferrari,” is believed to be a Russian national residing in Bali, Indonesia. Ferrari
`
`is one of the co-founders of Forsage and the self-proclaimed “goddess” of Forsage, and has
`
`appeared in a number of its promotional videos and interviews with lead promoters. Ferrari has
`
`
`
`- 5 -
`
`

`

`
`
`Case: 1:22-cv-03978 Document #: 1 Filed: 08/01/22 Page 6 of 49 PageID #:6
`
`prior experience participating in MLM projects. Upon information and belief, she holds Forsage
`
`Ethereum IDs 1 and 3, Forsage Tron ID 1, and Forsage BUSD ID 1, among others, and as alleged
`
`above, also has an interest in one or more of the four “subwallets” associated with Forsage
`
`Ethereum ID 1.
`
`14.
`
`Sergeev, also known as “Mike Mooney,” “Gleb,” and “Gleb Million,” is believed
`
`to reside in Moscow, Russia. Sergeev is one of the co-founders of Forsage and has appeared in
`
`promotional interviews as its “development director.” Sergeev has prior experience participating
`
`in MLM projects. Upon information and belief, he holds Forsage Ethereum IDs 1, 4, and 5,
`
`Forsage Tron ID 1, and Forsage BUSD ID 1, among others, and as alleged above, also has an
`
`interest in one or more of the four “subwallets” associated with Forsage Ethereum ID 1.
`
`15.
`
`Maslakov is believed to reside in Gelendzhik or Moscow, Russia. Maslakov is
`
`one of the co-founders of Forsage and has appeared primarily in Russian-language promotional
`
`videos for Forsage. Maslakov has prior experience participating in MLM projects. Upon
`
`information and belief, he holds Forsage Ethereum IDs 1 and 2, Forsage Tron ID 1, and Forsage
`
`BUSD ID 1, among others, and as alleged above, also has an interest in one or more of the four
`
`“subwallets” associated with Forsage Ethereum ID 1.
`
`B.
`
`The Promoters
`
`16. Ellis, age 60, resides in Louisville, Jefferson County, Kentucky. Ellis is a lead
`
`promoter of Forsage in the United States. He has appeared regularly on the Forsage Official
`
`YouTube channel in videos produced by Forsage, often referencing discussions he claims to have
`
`had with Forsage leadership. He also appeared there in a June 3, 2021 interview with Okhotnikov.
`
`Ellis is the instructor of the Forsage Academy courses “How to Talk About FORSAGE” and
`
`“FORSAGE Ethereum: Overview.” Ellis has prior experience participating in MLM projects.
`
`
`
`- 6 -
`
`

`

`
`
`Case: 1:22-cv-03978 Document #: 1 Filed: 08/01/22 Page 7 of 49 PageID #:7
`
`Upon information and belief, he holds Forsage Ethereum ID XX9469; Forsage Tron IDs XX7730
`
`and XX8157; and Forsage BUSD IDs XX0116 and XX1758; among others.
`
`17. Hamlin, age 65, is a resident of Henrico, Henrico County, Virginia. Hamlin is a
`
`lead promoter of Forsage in the United States. On or about April 23, 2020, he conducted a
`
`promotional interview of Okhotnikov that was broadcast and distributed on various social media
`
`sites, including YouTube and Facebook. Subsequently, he became the first U.S. promoter to have
`
`promotional videos posted to the Forsage Official YouTube channel. Hamlin is an instructor of
`
`the Forsage Academy courses “FORSAGE Smart Contract Full Overview” and “Train your
`
`success mindset.” Hamlin has prior experience participating in MLM projects. Upon information
`
`and belief, he holds Forsage Ethereum IDs XX0064 and XX1007; and Forsage Tron IDs XX0147
`
`and XX0280; among others. Hamlin declined to testify in the Commission’s investigation based
`
`on his Fifth Amendment privilege against self-incrimination.
`
`18. Theissen, age 28, is a resident of Hartford, Washington County, Wisconsin.
`
`Theissen is an administrator of the Crypto Crusaders group and a lead promoter of Forsage in the
`
`United States, primarily through large investor groups on social media platforms, including
`
`Forsage Official (on YouTube), Crypto Crusaders (on YouTube), and Crypto Journey (on
`
`Facebook). She is the administrator of CryptoKnights-in-Training, a Facebook group with over
`
`5,000 members that serves as the training arm of the Crypto Crusaders group. On or about March
`
`19, 2021, Theissen hosted her first video for the Forsage Official YouTube channel. Her videos
`
`provided information on marketing and strategies for investing in Forsage BUSD. On or about
`
`April 6, 2021, Theissen interviewed Okhotnikov and Ferrari regarding the launch of Forsage
`
`Binance, later known as Forsage BUSD. Theissen has prior experience participating in MLM
`
`projects. Upon information and belief, she holds Forsage Ethereum IDs XX3342, XX8733,
`
`
`
`- 7 -
`
`

`

`
`
`Case: 1:22-cv-03978 Document #: 1 Filed: 08/01/22 Page 8 of 49 PageID #:8
`
`XX8765, XX8879, XX4280, XX4396, and XX4998; Forsage Tron IDs XX6328, XX4341, and
`
`XX9259; and Forsage BUSD IDs XX1918 and XX2042; among others.
`
`C.
`
`The Crypto Crusaders
`
`19. Martinez, age 54, is a resident of Chicago, Cook County, Illinois. Martinez is a co-
`
`founder of the Crypto Crusaders group and a Forsage promoter. He has hosted regular Forsage
`
`training and promotional webinars on the Crypto Crusaders YouTube channel. Martinez has prior
`
`experience participating in MLM projects. Upon information and belief, he holds Forsage
`
`Ethereum IDs XX7810 and XX6088, the latter of which he gifted to Deering in August 2020; and
`
`Forsage Tron ID XX6892; among others. Martinez declined to testify in the Commission’s
`
`investigation based on his Fifth Amendment privilege against self-incrimination.
`
`20. Deering, age 69, is a resident of Coeur d’Alene, Kootenai County, Idaho. Deering
`
`is a co-founder of the Crypto Crusaders group and a Forsage promoter. He has hosted several
`
`Forsage how-to videos and has participated in and/or co-hosted many of the webinars hosted by
`
`Martinez on the Crypto Crusaders YouTube channel. Deering is also the creator of the Forsage
`
`onboarding website, 5figuremonths.com. Deering has prior experience participating in MLM
`
`projects. Upon information and belief, he holds Forsage Ethereum IDs XX7517, XX2514,
`
`XX8865, XX5091, and XX6088, the latter of which Martinez gifted to him in August 2020; and
`
`Forsage Tron IDs XX0127 and XX8847; among others.
`
`21. Bowen, age 44, is a resident of Pelahatchie, Rankin County, Mississippi. Bowen
`
`is a co-founder of the Crypto Crusaders group and a Forsage promoter. She has been a participant
`
`and co-host of many of the webinars hosted by Martinez on the Crypto Crusaders YouTube
`
`channel. Bowen has prior experience participating in MLM projects. Upon information and belief,
`
`she holds Forsage Ethereum IDs XX7957 and XX9418; and Forsage Tron ID XX1742; among
`
`
`
`- 8 -
`
`

`

`
`
`Case: 1:22-cv-03978 Document #: 1 Filed: 08/01/22 Page 9 of 49 PageID #:9
`
`others. Bowen declined to respond to the Commission’s subpoena during its investigation or
`
`appear for testimony.
`
`22. Shepperd, age 34, is a resident of Dunedin, Pinellas County, Florida. Shepperd is
`
`a co-founder of the Crypto Crusaders group and a Forsage promoter. She has been a participant
`
`and co-host of many of the webinars hosted by Martinez on the Crypto Crusaders YouTube
`
`channel. Shepperd has prior experience participating in MLM projects. Upon information and
`
`belief, she holds Forsage Ethereum IDs XX2490 and XX7907; Forsage Tron IDs XX0916 and
`
`XX6628; and Forsage BUSD ID XX1282; among others. Shepperd declined to testify in the
`
`Commission’s investigation based on her Fifth Amendment privilege against self-incrimination.
`
`III. RELATED ENTITY
`
`23.
`
`During the relevant time period, Forsage was an unincorporated entity believed to
`
`have been established by the Founders in Russia. Forsage operated as a website (www.forsage.io),
`
`hosted by Cloudflare Inc., a web-hosting platform, and also on the InterPlanetary File System
`
`(IPFS), a peer-to-peer network of cached Internet content designed to preserve information
`
`indefinitely. The website was publicly available to investors in the United States and was
`
`unrestricted – that is, it did not require a login or password to access content, including anonymized
`
`investor information contained in its “back office,” the Forsage Academy, the Forsage
`
`Community, or the Forsage Customer Care Center. In addition, the website contained no warnings
`
`suggesting it was not intended for U.S. investors. The Founders created and controlled Forsage.
`
`At no time did Forsage have a category of securities registered with the Commission.
`
`IV.
`
`JURISDICTION AND VENUE
`
`
`The Court has subject matter jurisdiction over this action pursuant to Sections
`
`24.
`
`20(b), 20(d) and 22(a) of the Securities Act, 15 U.S.C. §§ 77t(b), 77t(d) and 77v(a); and Sections
`
`
`
`- 9 -
`
`

`

`
`
`Case: 1:22-cv-03978 Document #: 1 Filed: 08/01/22 Page 10 of 49 PageID #:10
`
`21(d) and 27(a) of the Exchange Act, 15 U.S.C. §§ 78u(d) and 78aa(a).
`
`25.
`
`The Court has personal jurisdiction over Defendants and venue is proper in this
`
`District pursuant to Section 22(a) of the Securities Act, 15 U.S.C. § 77v(a), and Section 27(a) of
`
`the Exchange Act, 15 U.S.C. § 78aa(a), because, among other things, Martinez resides in this
`
`District, and some or all of the acts and transactions in which Defendants engaged and that
`
`constitute violations of the federal securities laws occurred in this District. In addition, this Court
`
`has jurisdiction because some or all of the Defendants engaged in conduct within the United States
`
`that constituted significant steps in furtherance of the violations of the federal securities laws
`
`alleged in this Complaint, even though some of the transactions at issue occurred outside the
`
`United States and involved foreign investors; and/or further because some or all of the Defendants,
`
`whether within or outside of the United States, engaged in conduct that had a foreseeable
`
`substantial effect within the United States.
`
`26.
`
`In connection with the conduct alleged in this Complaint, Defendants, directly and
`
`indirectly, singly or in concert with others, have made use of the means or instrumentalities of
`
`interstate commerce, the means or instruments of transportation or communication in interstate
`
`commerce, the mails, and/or the facilities of a national securities exchange – namely, through
`
`Defendants’ use of the Internet when engaging in the acts and transactions described herein.
`
`V.
`
`FACTUAL BACKGROUND
`
`A.
`
`27.
`
`The Formation of Forsage
`
`The Founders, along with a coder and website developer, created Forsage in the fall
`
`of 2019. This work included coding the smart contract on the Ethereum blockchain and building
`
`Forsage’s website, Forsage.io. Forsage.io launched on or about January 31, 2020.
`
`28.
`
`Forsage, through statements on its website and social media (the “Forsage
`
`
`
`- 10 -
`
`

`

`
`
`Case: 1:22-cv-03978 Document #: 1 Filed: 08/01/22 Page 11 of 49 PageID #:11
`
`Marketing Materials”), described itself as an “international community of the global decentralized
`
`ecosystem and the first ever smart contract marketing matrix of the Ethereum and Tron networks.”
`
`Forsage claimed that its “smart contract marketing matrix” “is a self-executing software algorithm
`
`that performs the function of distributing partner rewards between community members, subject
`
`to certain conditions (matrix marketing plan).” During the relevant time period, the Founders
`
`controlled and maintained the content of the website and the Forsage Marketing Materials.
`
`29.
`
`As described in the Forsage Marketing Materials, the Forsage compensation
`
`structure operated as follows: an investor participated in Forsage by purchasing “slots” in a smart
`
`contract created by Forsage, giving the investor certain rights to future compensation. Those
`
`payments could be earned in one of two ways: (i) by selling one or more slots to someone else; or
`
`(ii) through profit sharing in spillover payments from other investors in the larger Forsage network.
`
`B.
`
`30.
`
`The Forsage Investment Platforms
`
`During the relevant time period, Forsage launched smart contracts on the Ethereum,
`
`Tron, and Binance (BUSD) blockchains. Each of these respective investment platforms – Forsage
`
`Ethereum, Forsage Tron, and Forsage BUSD (collectively, the “Investment Platforms”) –
`
`contained at least three smart contracts: “Forsage x3,” “Forsage x4,” and “Forsage xGold.”
`
`Forsage subsequently launched “Forsage xXx” on the Binance blockchain. All of the Investment
`
`Platforms required an investor to buy a “slot” in a smart contract and then sell that slot to others in
`
`order to earn compensation. The Investment Platforms are depicted below:
`
`Forsage Ethereum
`
`Forsage Tron
`
`Forsage Binance
`
`x3
`
`x4
`
`xGold
`
`x3
`
`x4
`
`xGold
`
`- 11 -
`
`
`
`
`
`
`
`x3
`x4
`xGold
`xXx
`
`
`
`

`

`
`
`Case: 1:22-cv-03978 Document #: 1 Filed: 08/01/22 Page 12 of 49 PageID #:12
`
`31.
`
`To purchase a slot in any Forsage smart contract, an investor created his or her own
`
`crypto-asset wallet and populated it with funds in the form of the applicable crypto-asset token:
`
`Ethereum (Eth), Tron (TRX) or Binance (BUSD). The investor then directed payment of funds
`
`from the wallet to the Forsage x3, x4, xGold, or xXx smart contract on the corresponding
`
`blockchain. As soon as payment was made to the smart contract, the investor relinquished all
`
`control over where the investment was distributed, and the transfer of funds was irrevocable. The
`
`smart contract automatically routed the funds to other investors’ wallet addresses according to the
`
`algorithm coded by the Founders. These distributions constituted the compensation paid to an
`
`investor pursuant to the Forsage x3, x4, xGold, and xXx structures and took the form of (i)
`
`payments made to an investor by downlines recruited by the investor; and (ii) profit sharing in the
`
`form of spillover payments from other investors in the larger Forsage network.
`
`32.
`
`Spillovers were payable to investors even if they did not recruit any downlines and
`
`were made in accordance with the applicable smart contract. Forsage x4, xGold, and xXx provided
`
`spillover payments to wallets of those other than an investor’s immediate upline, but Forsage did
`
`not disclose to investors how the payments would be allocated. With Forage x3, an investor could
`
`receive spillovers if someone in their downline was “overtaken” by a subsequent investor. For
`
`instance, if an investor (Investor A) owned slot 4, his or her downline (Investor B) only purchased
`
`up to slot 3, and Investor B’s downline (Investor C) later purchased slot 4, then the payments on
`
`the purchase of slot 4 by Investor C would skip that person’s immediate upline (Investor B) and
`
`go to the next investor above him or her that owned slot 4 (Investor A).
`
`33.
`
`All of the Investment Platforms incentivized investors to purchase all available
`
`slots. Indeed, the more slots investors purchased, the greater the compensation they stood to earn
`
`from the sale of those slots in the downline chain. In that regard, the potential earning power of
`
`
`
`- 12 -
`
`

`

`
`
`Case: 1:22-cv-03978 Document #: 1 Filed: 08/01/22 Page 13 of 49 PageID #:13
`
`the upline investors was based on the efforts of their downline recruits. In addition, the more slots
`
`that were purchased and sold, the more the Forsage community benefitted as a whole in the form
`
`of profit sharing through the spillover payments to the pool of investors who participated in
`
`accordance with the applicable smart contract.
`
`
`
`
`
`(1)
`
`Forsage Ethereum
`
`34.
`
`Forsage Ethereum launched on or about January 31, 2020. The Forsage x3 and x4
`
`smart contracts on the Ethereum blockchain were the first smart contracts deployed by Forsage.
`
`The investment structure used in x3 and x4 later was replicated on the Tron and BUSD
`
`blockchains.
`
`35.
`
`In Forsage Ethereum, the cost of a slot in Forsage x3 or x4 – and the income that
`
`could be paid on that slot – doubled with each slot that an investor purchased. Depicted below is
`
`a chart distributed by Forsage that shows the slots, numbered 1-12, in Forsage Ethereum x3 and
`
`x4, as well as the price for each slot stated in ether (“Eth”), the token used on the Ethereum
`
`network. The cost of each slot ranged from 0.025 Eth to 51.2 Eth. The circles beneath each slot
`
`represent the number of people that needed to be recruited to buy that slot before the investor could
`
`receive their full compensation and “reopen” the slot for additional sales:
`
`
`
`- 13 -
`
`

`

`
`
`Case: 1:22-cv-03978 Document #: 1 Filed: 08/01/22 Page 14 of 49 PageID #:14
`
`
`
`
`
`The Forsage Marketing Materials provided that “in Forsage x3, you get 100% of the payment to
`
`your Eth wallet from spots one and two. Spot three reopens the slot again and payment goes to
`
`your upline.” In addition, “[i]n Forsage x4, members who take two places below you in first line
`
`go to your upline or they spillover to someone else on your team. You receive 100% of the
`
`payments on the second line: spots three, four, and five go to your wallet, while spot six reopens
`
`this slot’s matrix again with empty spots and payment goes to your upline.” This compensation
`
`structure was depicted in the following chart on the Forsage.io website:
`
`
`
`- 14 -
`
`

`

`
`
`
`
`
`
`Case: 1:22-cv-03978 Document #: 1 Filed: 08/01/22 Page 15 of 49 PageID #:15
`
`
`
`
`
`36.
`
`On or about January 3, 2021, Forsage launched the Forsage xGold smart contract
`
`via the Forsage Ethereum Investment Platform. The investment and compensation structure for
`
`xGold in Forsage Ethereum mirrored that for Forsage Tron (detailed below). In order to invest in
`
`xGold in Forsage Ethereum, an investor first had to invest in the x3 and x4 platforms, but
`
`simultaneous investment in x3, x4, and xGold was not required for new investors as it was in
`
`Forsage Tron.
`
`37.
`
`Forsage’s website falsely stated that “[a]ll funds [paid to Forsage] are transferred
`
`between members, there are no hidden fees,” and “100% of the income goes directly and
`
`transparently to the members of the project with zero risk.” In fact, the Founders coded the xGold
`
`smart contract on Forsage Ethereum to automatically divert funds paid by investors to an Ethereum
`
`wallet (the “Non-Investor Wallet”), which Forsage deployed on the same day the xGold smart
`
`contract was launched.
`
`38.
`
`The Non-Investor Wallet was not associated with any Forsage ID and was not a
`
`Forsage investor because it never sent funds to the Forsage xGold smart contract. As of June 29,
`
`
`
`- 15 -
`
`

`

`
`
`Case: 1:22-cv-03978 Document #: 1 Filed: 08/01/22 Page 16 of 49 PageID #:16
`
`2022, the Non-Investor Wallet received 1,029.34 Eth – essentially all of its funds – from the xGold
`
`smart contract. Based on Forsage’s own representations, these funds should have been paid to
`
`investors in compensation. In early transactions on the Ethereum xGold smart contract, all
`
`invested funds were diverted to this Non-Investor Wallet.
`
`
`
`
`
`(2)
`
`Forsage Tron
`
`39.
`
`Forsage Tron launched on or about September 6, 2020. The Forsage x3 and x4
`
`smart contracts on Tron largely mirrored the investment and compensation structure of Forsage
`
`Ethereum, except there were 15 slots in each, instead of 12, and the price for each slot was stated
`
`in tron (“TRX”), the token used on the Tron network. The cost of each slot ranged from 100 TRX
`
`to 1,097,600 TRX.
`
`40.
`
`On or about November 6, 2020, Forsage deployed a third smart contract on the
`
`Tron Investment Platform: “Forsage xGold.” The xGold smart contract had 30 circles within each
`
`slot and a more complex, percentage-based pyramid-shaped compensation structure, as depicted
`
`in the Forsage Marketing Materials:
`
`
`
`
`
`
`
`- 16 -
`
`

`

`
`
`Case: 1:22-cv-03978 Document #: 1 Filed: 08/01/22 Page 17 of 49 PageID #:17
`
`41.
`
`Investors who invested in Forsage Tron prior to the launch of xGold were given
`
`the option to invest separately in xGold. Those who joined Forsage Tron after the launch were
`
`required to invest simultaneously in x3, x4, and xGold.
`
`
`
`
`
`42.
`
`(3) Forsage BUSD
`
`On or about May 31, 2021, Forsage launched the Forsage x3 and x4 platforms
`
`on a new program: Forsage BUSD. Forsage BUSD used the BUSD token, a crypto-asset on the
`
`Binance blockchain. As with Forsage Ethereum, there were 12 slots each in Forsage BUSD x3
`
`and x4. The cost of a slot ranged from 5 BUSD to 9,900 BUSD. The Forsage Marketing Materials
`
`depicted the structure and cost of investing in Forsage BUSD x3 and x4:
`
`
`
`
`
`
`
`43. On or about July 17, 2021, Forsage launched the xXx smart contract on the Binance
`
`blockchain. Like x4 and xGold, xXx was designed to provide “a more advanced team-building
`
`matrix” – that is, more spillover opportunities. According to a description of the program provided
`
`on the Forsage Community website:
`
`Activating the first three places on the second line brings 30% reward to the user and 70%
`reward to the upline partners. And then there’s more: activating the first seven places in
`line three yields 70% reward to the user and 30% reward to his upline partners. The last
`
`
`
`- 17 -
`
`

`

`
`
`Case: 1:22-cv-03978 Document #: 1 Filed: 08/01/22 Page 18 of 49 PageID #:18
`
`places on the second line (30%) and the third line (70%) are used for the level recycle,
`which is the automatic opening of the same level. Recycle re-opens the same level for you,
`and you occupy a new place in your upline’s structure.
`
`The program is expected to have 12 levels. To activate the first level in xXx, the user must
`have the first levels in x3 and x4 activated. And once x3 and x4 are activated, the xXx
`program can be activated starting with level 1.
`
`
`The Forsage Marketing Materials depicted the structure and cost of investing in Forsage BUSD
`
`xXx:
`
`
`
`
`
`
`44. On or about December 1, 2021, Forsage launched xGold – its fourth and
`
`purportedly final platform in Forsage BUSD. Like the xGold smart contracts in Forsage Ethereum
`
`and Tron, Forsage BUSD xGold has “more advanced team-building” possibilities and therefore
`
`more compensation in the form of spillovers. The compensation structure in Forsage BUSD xGold
`
`is the same as in Forsage Ethereum and Tron.
`
`(4)
`
`Recent Developments
`
`45. On or about March 7, 2022, there was a split among the Founders of Forsage.
`
`Okhotnikov on the one hand, and Ferrari and Sergeev on the other, differed on the direction of
`
`Forsage, and Okhotnikov apparently was cut off from access to Forsage.io and the Telegram
`
`
`
`- 18 -
`
`

`

`
`
`Case: 1:22-cv-03978 Document #: 1 Filed: 08/01/22 Page 19 of 49 PageID #:19
`
`channels, among other things. Okhotnikov retained control of the Forsage Official YouTube
`
`Channel, however, which he used to create videos criticizing his former partners. Soon thereafter,
`
`the two sets of Founders created their own matrix marketing platforms: Ferrari and Sergeev
`
`launched “Express Smart Game” (https://express.game) and Okhotnikov created “Meta Force”
`
`(https://meta-force.space).
`
`46. Both platforms are variations of the compensation and recruitment structure used
`
`in Forsage and both represent efforts by the Founders to perpetuate the flow of funds into Forsage
`
`and to recruit Forsage investors into these new platforms.
`
`47.
`
`In addition to mimicking many aspects of the Forsage matrices, Express Smart
`
`Game is directly connected to Forsage; according to its website, it “uses the same partner structure
`
`as in Forsage BUSD, so all your partners will join Express as your partners automatically. All
`
`they need is just [to] activate levels in Express game.” In a video posted on the Forsage Official
`
`YouTube Channel on March 7, 2022, Okhotnikov characterized Express Smart Game as “a
`
`pyramid scheme” and said that because Ferrari and Sergeev retained cont