SEC Charges ICO: US Agency Takes Action Against Alleged Token Scammer

Cornelia Mascio
Ottobre 1, 2017

RECoin issued a press release in July where Zaslavskiy claimed to be a "real estate guru". While REcoin's ICO was being promoted as being backed by real estate, DRC's was being said to be backed by diamonds.

The SEC says that Zaslavskiy's fraudulent activity extended to another ICO, Diamond Reserve Club, which he founded after the US government "interfered" with the REcoin ICO, according to a statement posted on a bitcoin forum attributed to Zaslavskiy.

Allegedly, Zaslavskiy sold cryptocurrencies backed by assets that did not exist in two token sales, one for a project called Diamond Reserve Club World, and the other for an effort called the REcoin Group Foundation, the SEC said. But while Zaslavskiy told investors that REcoin had a "team of lawyers, professionals, brokers, and accountants", the SEC claims he had not hired any personnel to invest the raised funds.

A whitepaper on the REcoin website further stated that "t$3 he value of the currency can grow at least two ways: through the steady increasing value of the real estate investments that REcoin is used to purchase, and a higher REcoin value when the demand for REcoin rises". Zaslavskiy also reportedly told potential investors that REcoin had already raised between $2 million and $4 million, but the actual amount he had raised was closer to $300,000. The ICO was scheduled to run until October 9. This business purportedly invests in diamonds and obtains discounts with product retailers for individuals who purchase "memberships" in the company, notes the SEC.

The SEC has obtained an emergency court order to freeze assets belonging to Zaslavskiy and his companies after filing a complaint with a federal district court in Brooklyn, N.Y., charging RECoin and DRC World with violations of anti-fraud and registration provisions of federal securities law. Despite their representations to investors, the SEC alleges that Zaslavskiy and Diamond have not purchased any diamonds nor engaged in any business operations. The SEC seeks permanent injunctions and disgorgement plus interest and any applicable penalties.

"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", according to Andrew Calamari, director of the SEC's New York Regional Office.

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