The accused in the REcoin ICO scam admitted to committing the fraud and is likely to be sentenced under violation of securities laws.


Accused Pleads Guilty

Maksim Zaslavskiy charged with running two Initial Coin offering (ICO) frauds has pleaded guilty, on Thursday afternoon at a court in the New York borough of Brooklyn. He admitted cheating about 1000 investors.

The story was reported earlier by MSN. Zaslavskiy, aged 39, confessed to lying and defrauding investors by marketing two ICO scams under the names REcoin Group Foundation, LLC (REcoin) and DRC World, Inc, also known as Diamond Reserve Club (Diamond).

“I, along with others, made these false statements to obtain money from investors,” said Zaslavskiy.

ICOs are a mechanism used by blockchain start-ups to raise funds for their projects. The ICOs raise funds in Bitcoin, Ethereum or other crypto-assets and issue their native tokens in return to the investors.

Regulators and law enforcement authorities like the Department of Justice have in the recent past increased their surveillance of past and current ICOs. SEC (The US Securities and Exchange Commission) has repeatedly said that most tokens fall under the category of securities and need to comply with federal laws.

The regulators and agencies are cracking down upon firms that are found to be in violation of the norms.

Scam ICOs

It is reported that the accused marketed REcoin as a token backed by real estate in developed countries. He even lied to investors about 2.8 Million tokens being already sold.

There were no properties that were purchased to back the cryptocurrency and Zaslavskiy, it is reported, did not even use a blockchain to issue the fake securitized certificates.

“We had not yet purchased any real estate,” admitted Zaslavskiy.

Diamond cryptocurrency which was supposed to be backed by diamonds was also being marketed using similar false claims. The accused had not purchased any assets to support the coin.

Zaslavskiy also lied to the investors of REcoin about having a team of lawyers, brokers, and accountants who would invest the funds raised into real estate.

The Sentence

Zaslavskiy could face up to five years in prison when he is sentenced later for committing securities fraud. His is also likely to be fined by SEC who has slapped him with civil charges.

“This is a case where he had a good-faith belief in his cryptocurrency products, but he marketed it as further along than what had been actually developed,” said his lawyer after the court session.

According to the article, U.S. District Judge Raymond Dearie earlier in September had ruled that federal securities fraud laws could be applied to cryptocurrencies. He has further stated that it would be up to a jury to decide whether the ICO tokens in each case were securities.

What are your thoughts on this ICO fraud prosecution? Let us know in the comments below.


Images courtesy of ShutterStock

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