The Securities and Exchange Commission (SEC) of the US charged businessman Maksim Zaslavskiy and his two companies in connection with defrauding investors in initial coin offerings (ICOs) for projects related to real estate and diamonds. The information is according to a SEC’s press release on September 29.
It is worth mentioning that the case of fraud in an ICO is the first in the practice of the commission.
The SEC claims that Zaslavskiy and his companies sold unregistered securities, and the virtual tokens or coins that were sold did not actually exist.
According to the SEC complaint, investors in the REcoin Group Foundation and DRC World (also known as the Diamond Reserve Club) were promised high profits from companies’ operations. In reality, the companies did not conduct any operations.
The press release says that Zaslavskiy advertised RECoin as "The First Ever Cryptocurrency Backed by Real Estate." He also argued that the company’s "team of lawyers, professionals, brokers, and accountants" will subsequently invest the proceeds from RECoin’s ICO in the real estate market.
Zaslavskiy and REcoin are said to have misrepresented the information that they have attracted from investors from $2 to $4 million, whereas the actual amount is about $300 thousand. Besides, the company did not hire any of the listed experts.
A similar pattern was repeated in the case of DRC World, which allegedly invested in diamonds. The SEC claims that neither Zaslavskiy nor the company acquired any diamonds and did not engage in any commercial activity.
The SEC has managed to freeze the assets belonging to Zaslavsky and its companies through a court order. In the future, the case will be considered in the US Eastern District Court of New York (Brooklyn).
According to Andrew M. Calamari, Director of the SEC’s New York Regional Office, “Investors should be wary of companies touting ICOs as a way to generate outsized returns. As alleged in our complaint, Zaslavskiy lured investors with false promises of sizeable returns from novel technology."
The SEC's investigation, which has a pending status, has been managed by Pamela Sawhney, Jorge Tenreiro, and Valerie A. Szczepanik. Lara S. Mehraban is currently supervising the case.
Last week, it was reported that the financial regulator of South Korea had banned the initial coin offerings (ICOs). The decision comes after China did the same thing in relation to fundraising via token events.