The United States Department of Justice is continuing its crackdown on cryptocurrency crooks. Late on Thursday afternoon, at a court in the New York borough of Brooklyn, Maksim Zaslavskiy plead guilty to defrauding investors through two initial coin offerings (ICOs) – REcoin Group Foundation, LLC (REcoin) and DRC World, Inc., also known as Diamond Reserve Club (Diamond).
Court documents indicate that Zaslavskiy marketed REcoin as a cryptocurrency backed by real estate. In fact, Zaslavskiy had not purchased any real estate and was not even using blockchain to issue the ‘certificates’ that were used to demonstrate ownership in REcoin.
The same was true for Diamond. Again, Zaslavskiy said that the cryptocurrency was “an exclusive and tokenized membership pool” hedged by diamonds. But as with REcoin, he hadn’t purchased any physical assets – in this case, diamonds – to back his cryptocurrency.
REcoin – 2.8 million fake investors
Aside from lying about the purchase of assets backing his cryptocurrencies, Zaslavskiy also claimed that REcoin had a team of lawyers, brokers, and accountants working to invest money raised into real estate.
2020 Global Market Outlook: How the “Known Unknowns” Can Affect CurrenciesGo to article >>
Of course, there was no such team. On top of that, Zaslavskiy said that 2.8 million REcoin tokens had been sold. In reality, only 1000 investors had put money into the fraudulent scheme.
Earlier this year, Zaslavskiy had tried to get the charges against him dropped, saying that securities laws should not be applied to him. Judge Raymond J. Dearie dismissed those claims noting that:
“Simply labeling an investment opportunity as ‘virtual currency’ or ‘cryptocurrency’ does not transform an investment contract—a security—into a currency,” and does not, therefore, remove the offerings from the ambit of securities law.”
When sentenced, Zaslavskiy could face up to five years behind bars. He is also likely to be fined by the Securities and Exchange Commission, with the American regulator filing civil charges against him.