SEC accuses ICO operator of fraud

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Bitcoin and other cryptocurrencies may be set to face more scrutiny from law authorities following a landmark case in the US.

The Securities and Exchange Commission (SEC) has raised its first ICO-related lawsuit, charging businessman Maksim Zaslavskiy with fraudulently running two initial coin offerings (ICOs).

The ICO is an unregulated investment practice in which companies take investors’ cryptocurrency in exchange for “crypto-tokens”. This practice has already been banned in China and South Korea recently, sending the value of crptocurrencies plummeting.

The SEC has been issuing warnings that ICOs are a good platform for scammers. Zaslavskiy was, according to the SEC, selling unregistered securities and issuing digital tokens or coins that don’t exist. He was running two companies: the REcoin Group Foundation and the Diamond Reserve Club. The two companies have been reassuring their investors that they can expect sizeable returns on their operations, when in fact, the companies had no real operations at all.

According to the SEC, Zaslavskiy promoted REcoin as the “First Ever Cryptocurrency Backed by Real Estate,” despite the fact a promised team of real estate professionals who would invest the ICO’s earnings in property never existed. The second ICO, Diamond Reserve Club, promised it would invest in diamonds and provide “discounts with product retailers for individuals who purchase ‘memberships’ in the company.”

Zaslavskiy’s assets have been frozen.

"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,” SEC said.

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