Operator of RECoin, Diamond ICOs Sentenced to Prison for Fraud

Zaslavskiy is also likely to be fined, with the amount of restitution to be determined by the court later.

RECoin creator Maksim Zaslavskiy has been sentenced to an 18-month prison sentence for his role in two ICOs, one relating to diamonds and one relating to real estate. Zaslavskiy is also likely to be fined by SEC after he was slapped with civil charges, with the amount of restitution to be determined by the court at a later date.

“Zaslavskiy committed an old-fashioned fraud camouflaged as cutting-edge technology,” stated United States Attorney Donoghue.

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The ruling comes as the US government and regulatory agencies step up their crackdown on cryptocurrency-related fraud.

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This case originated with a civil complaint filed in 2017, which was stayed pending the criminal case filed earlier last year. The SEC and the United States Department of Justice (DOJ) each filed an action against Zaslavskiy, alleging securities fraud in connection with running two initial coin offerings. He pleaded guilty to marketing two ICO scams under the names REcoin and DRC World, where he admitted cheating about 1000 investors.

A straightforward scam

REcoin was promoted as a token backed by real estate holdings in developed countries. The court said Zaslavskiy lied to investors as there were no properties purchased to back his fake cryptocurrency. In turn, the other ICO scam, DRC World, also known as Diamond Reserve Club (Diamond), was supposed to be backed by diamonds. However, the scammer had not purchased any assets to support the coin and only marketed the scheme using similar false claims.

Zaslavskiy lied to the investors about having a team of lawyers, brokers, and accountants who would invest the funds raised into real estate. He also lied about raising between $2 million and $4 million from selling 2.8 million REcoin tokens, when the actual amount is approximately $300,000.

In 2018, the defendant brought a motion to dismiss the criminal case, alleging that REcoin and Diamond did not involve securities and that the securities laws are vague as applied. However, a NY judge declined to dismiss the criminal indictment and said Zaslavskiy, and his ICO operation, was a clearcut scam meeting the elements of the Howie test.

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