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Investment scheme Forsage is illegal, says SEC

The Securities and Exchange Commission has issued a stern warning against Forsage, an investment scheme headed by a certain Lado Okhotnikov. Forsage is NOT duly registered with the SEC and lacks the necessary license to solicit, accept or take investments from the public or issue investment contracts and other forms of securities.

On June 30, 2020, the Commission said that Forsage is illegally engaging in investment activities in the guise of cryptocurrency trading.

SEC Cagayan de Oro Director Atty. Renato Egypto said that many from Region X have engaged with Forsage already.

“SEC Cagayan de Oro Extension Office has received numerous reports as well through email and direct messages inquiring about the legality of Forsage. This really concerns us and so we continuously remind the public to be careful enough considering there are a lot of them who solicit investment without registration or license from the Commission,” he said in a statement sent to Mindanaoan.com

Forsage touts a Crowdfunding International Platform or a Smart Contract Crypto Earning Program based on the Ethereum (ETH) blockchain technology, which supposedly provides long-term active and passive income to investors through a crowdfunding referral system.

As posted online, Forsage offers two commission payout systems or compensation plans called Forsage X3 and Forsage X4 for a minimum investment of 0.05 ETH, or at least P600, and a maximum of 51.2 ETH, or almost P600,000. Each program has 12 income slots that the investor may activate.

Under Forsage X3, for instance, an investor needs three referrals to complete the cycle. The first two referrals’ membership fees shall be paid to the referring member’s account while the third referral’s membership fee shall be considered as a “re-entry fee” and awarded to the referring member’s sponsor or upline.

Basically, the active income generated from the compensation plans depends on the number of referrals and/or membership fees gathered while passive income is acquired through spillovers.

Accordingly, Forsage’s so-called smart contract is synonymous to an investment contract, where there is an investment or placement of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.

An investment contract is a security and, therefore, must be duly registered with and approved by the SEC before it could be sold or offered for sale to the public, pursuant to Section 8 of The Securities Regulation Code.

Aside from lacking the necessary licenses, Forsage’s compensation plan resembles a Ponzi scheme, where investors are paid using the contribution of new investors, according to the SEC.

The Commission also noted that Forsage does not appear in the list of virtual currency exchanges registered with the Bangko Sentral ng Pilipinas.

A maximum fine of Php 5 million or imprisonment of 21 years or both await those who act as salesmen, brokers, dealers or agents of entities engaged in unauthorized investment schemes, for violation of Republic Act No. 8799, or The Securities Regulation Code, among others.

Egypto also said that “the Commission is very serious in running after perpetrators and pressing appropriate charges against those who prey on the public through investment scams, fraudulent emails, social media invites, or other similar acts that make use or take advantage of the current crisis.”

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