DOJ Finds REcoin ICO Scammer Guilty Under Security Laws

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 Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe Read this Term 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 Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw Read this Term, Zaslavskiy also claimed that REcoin had a team of lawyers, brokers, and accountants working to invest money raised into real estate.

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.