The Philippines Securities and Exchange Commission (SEC) has warned investors against the Forsage, the top decentralized application (DApp) on Ethreum blockchain, calling it a pyramid scheme.
In a June 30 announcement, the regulator urged the investors from not using the DApp, raising questions on its business model and also ordered the owner to officially register with the watchdog.
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“Based on numerous reports and information gathered by the Commission, the entity operating under the name FORSAGE, headed by LADO OKHOTNIKOV, is found to be engaged in investment-taking activities in the Philippines which is NOT AUTHORIZED by the Commission,” the SEC noted.
Forsage is the highest gas-consuming DApp on Ethreum blockchain, with 25 percent of the total, offering a “fully decentralized matrix marketing project.”
The model of the DApp resembles with classic multi-level marketing (MLM) scheme as users profit by attracting more users to invest in multi-level “slots” – each slot is twice as expensive as the previous, and returns twice as much profit to the original referrer.
“Forsage’s so-called smart contract partakes of the nature of securities through an investment contract where investors need not exert any effort other than to invest or place money in its scheme in order to profit,” the regulator added.
Cannot block a decentralized platform
Being a decentralized platform, the Filipino authority cannot put an outright ban on the platform, but it can gather transactional data and approach the investors individually – a process that can turn out to be costly and ineffective.
Forsage also points this out in its advertisement to potential investors.
DappStats, a DApp ranking website, also labeled the Ethreum application with “high-risk”.
“The public is advised NOT TO INVEST or STOP INVESTING in any scheme offered by FORSAGE or such other entities engaged in smart contracts, cryptocurrencies, and digital asset trading that are not registered with the Commission and the BSP,” the regulator warned.