It has been a depressing month for crypto — and it's solely the third day of August

The scheme, called Forsage, claimed to be a decentralized smart contract platform, allowing millions of retail investors to enter into transactions via smart contracts that operated on the ethereum, tron and binance blockchains. The SEC alleges that for more than two years, the setup functioned like a standard pyramid scheme, in which investors earned profits by recruiting others into the operation. 

In the SEC’s formal complaint, Wall Street’s top watchdog calls Forsage a “textbook pyramid and Ponzi scheme,” in which Forsage aggressively promoted its smart contracts through online promotions and new investment platforms, all while not selling “any actual, consumable product.” The complaint adds that “the primary way for investors to make money from Forsage was to recruit others into the scheme.”

The SEC said Forsage operated a typical Ponzi structure, wherein it allegedly used assets from new investors to pay earlier ones.

“As the complaint alleges, Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors,” wrote 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.”

Forsage, through its support platform, declined to offer a method for contacting the company and did not offer comment.

Four of the eleven individuals charged by the SEC are founders of Forsage. Their current whereabouts are unknown, but they were last known to be living in Russia, the Republic of Georgia and Indonesia.

The SEC has also charged three U.S.-based promoters who endorsed Forsage on their social media platforms. They were not named in the commission’s release.

Forsage was launched in January 2020. Regulators around the world have tried a couple of times to shut it down. Cease-and-desist actions were brought against Forsage first in September of 2020 by the Securities and Exchange Commission of the Philippines. In March 2021, the Montana commissioner of securities and insurance tried the same. Despite this, the defendants allegedly continued to promote the scheme while denying the claims in several YouTube videos and by other means.

Two of the defendants, both of whom did not admit or deny the allegations, agreed to settle the charges, subject to court approval.

The nature of the bug meant that users didn’t need any programming skills to exploit it. Others caught on and deployed armies of bots to carry out copycat attacks.

“Without prior programming experience, any user could simply copy the original attackers’ transaction call data and substitute the address with theirs to exploit the protocol,” said Victor Young, founder and chief architect of crypto startup Analog.

“Unlike previous attacks, the Nomad hack became a free-for-all where multiple users started to drain the network by simply replaying the original attackers’ transaction call data.”

Blockchain bridges are a popular way of moving tokens off of networks like Ethereum, which has gained a reputation for slow transaction times and high fees, into cheaper, more efficient blockchains. But sloppy programming choices have made them a prime target for hackers seeking to swindle investors out of millions. More than $1 billion worth of crypto has been lost to bridge exploits so far in 2022, according to blockchain analysis firm Elliptic.

“I can only hope that developers and projects will learn that they are running a critical piece of software,” said Adrian Hetman, tech lead at Web3 security firm Immunefi, told CNBC.

“They need to keep the security first be security first at every business decision because they are dealing with people’s money a lot of that money is locked in those contracts.”

Nomad said it’s working with crypto security firm TRM Labs and law enforcement to trace the movement of funds, identify the perpetrators behind the attack and return stolen tokens to users.

“Nomad is committed to keeping its community updated as it learns more in the coming hours and days and appreciates all those who acted quickly to protect funds,” the company said in the statement.

And then on Tuesday night, unknown attackers came after hot wallets connected to solana’s blockchain.

Solana’s sol token, one of the largest cryptocurrencies after bitcoin and ether, fell about 8% in the first two hours after the hack was initially detected, according to data from CoinMarketCap. It’s currently down about 1%, while trading volume is up about 105% in the last 24 hours.

Starting Tuesday evening, multiple users began reporting that assets held in “hot” wallets — that is, internet-connected addresses, including Phantom, Slope and Trust Wallet — had been emptied of funds.