Montana's securities regulator ordered the operator of Forsage, an investment scheme built on Ethereum and widely viewed as a pyramid scam, to stop its work within the state.
The developments signify the first such action in the U.S. against Forsage, a so-called "online marketing matrix program." Participants make money depending on how many successful referrals they make -- a strategy that echoes a Ponzi scheme, by which earlier investors are paid out with the proceeds taken from newer ones.
Forsage apparently attracted the attention of the Securities and Insurance Office of the Montana State Auditor, with Commissioner Troy Downing ordering a cease-and-desist on March 22.
"Forsage does not try to hide the fact they are a pyramid scheme. Members must pay with Ethereum cryptocurrency to the person above them to buy a position on the pyramid. The currency used to buy the position goes directly to the participant above," the agency said.
A request for comment sent to the Montana regulator was not returned by press time, including specifics on the scale of Forsage's operations in the U.S. state.
In September, Forsage was subject to a similar cease-and-desist order from government officials in the Philippines, the scheme's country of operations. At the time, the Philippines' Securities and Exchange Commission similarly identified Forsage as a classic pyramid scheme posing as a crowdfunding platform. Since that heightened scrutiny began, Forsage has seen its volumes collapse, according to information published by DappRadar.
But even before authorities got involved, the crypto world identified malicious projects including Forsage as problem points amid spiking gas fees on the Ethereum network last spring.