The first fraud charges involving initial coin offerings have been issued by The U.S. Securities and Exchange Commission (SEC). The complaint, filed in New York district court, alleges that a businessman and two companies defrauded investors through ICOs purportedly backed by real estate and diamonds.
ICOs Purportedly Backed by Real Estate and Diamonds
The SEC alleges that Maksim Zaslavskiy and his companies REcoin Group Foundation and DRC World Inc., also known as Diamond Reserve Club, fraudulently sold digital tokens. In two separate offerings, REcoin and DRC investors were told to expect sizeable returns on the false premise that the tokens would appreciate in value in accord with REcoin's real estate assets and DRC's diamond assets.
The SEC says that the statements made by Recoin and DRC were false and neither company had any real operations. According to the complaint, Zaslavskiy and REcoin also allegedly misrepresented that they had raised between $2 million and $4 million from investors when the actual amount was $300,000.
Companies Make False Claims to Lure Investors
The SEC alleges that Zaslavskiy, REcoin, and DRC made false statements in order to raise money through initial coin offerings from investors through the companies' websites, press releases, and through social media posts.
The statements touted REcoin as the "first ever cryptocurrency backed by real estate” and told investors that REcoin had a team of professionals who would invest REcoin's ICO proceeds into real estate. In truth, no such professionals had been hired.
SEC Seeks Permanent Injunctions
The SEC charges Zaslavskiy, REcoin, and Diamond with violating anti-fraud and registration provisions of federal securities laws. The complaint seeks permanent injunctions and disgorgement, plus interest and penalties. In addition, the SEC seeks to bar Zaslavskiy from acting as an officer or director of any public company and from participating in any digital securities offerings.
In July of this year, the SEC warned investors that token offerings resembling traditional securities sales, including the participation of individuals investing money with the expectation of profit, will be treated as such for regulatory purposes. The complaint marks the first time the SEC has pursued charges involving ICOs.
In the interim, the SEC has obtained an emergency court order to freeze the assets of Zaslavskiy and his companies.
Have You Lost Money in Initial Coin Offerings?
If you believe you have been the victim of investment fraud, you may have certain legal rights that require your immediate attention.
Call an Investment Fraud Attorney Today
If you are looking for an investment fraud attorney to review your rights and options, the investment fraud lawyers at Dimond Kaplan & Rothstein, P.A. have recovered more than $100 million from banks and brokerage firms for their wrongful actions.
With offices in Los Angeles, New York, West Palm Beach and Miami, our investment fraud attorneys represent clients nationwide and may be able to help you recover your investment losses.
Contact an investment fraud attorney at Dimond Kaplan & Rothstein, P.A. today to schedule an appointment or consultation to review your rights and options.
