First ICO Fraud Case Concludes With Guilty Plea

The first case of fraud involving ICOs recently ended in a guilty plea when a man from New York admitted that he lied to over 1000 people. The man, Maksim Zaslavskiy, 39, said that he wanted to raise funds for two ICOs. These ICOs were backed by investments in diamonds and real estate. However, the assets did not exist and it was purely a scam. He said that he and others made the false claims to gain money from people in a court in Brooklyn, NY.

The ICOs are a new method of raising funds that are used by blockchain companies. They work in a similar manner to IPOs. However, unlike IPOs, ICOs raise money over a promise of a product that does not yet exist.

Maksim said that he and his accomplices made false claims to investors when he claimed that the REcoin was backed by real estate in the developed world. He also claimed that they had already sold over 2.8 million of the tokens. He admitted that they had not bought any real estate when the claim was made.

In August 2017, he began another scam called Diamond Reserve Coin, in it; he claimed that the coin was backed by precious diamonds. He admitted that no diamond purchases had been made when the claim was made.

The accused could go to jail for up to 37 months when sentencing takes place on April 19. He was charged with a conspiracy to commit securities fraud. The prosecutors were silent on how much he managed to swindle investors.

According to a lawyer, his client simply had a good-faith belief in his products. However, he only made the mistake of marketing it further than where it had reached.

A judge in federal court recently ruled that securities laws could cover ICOs. This is a victory for the government as it aims to regulate ICOs worth billions of dollars. Now they can go after those who break the law in much the same way as they pursue those in the stock market.

This ruling was made in the case of false claims about crypto backed by diamonds and real estate. It was part of what led to the guilty plea. Thus far, about $18.7 billion has been raised by ICOs.

The Chairman of the SEC has said that such fundraising has to be regulated. According to a professor at Way State University, there is a lot of fraud going on right now. He believes that the ruling will place the SEC in a strong position to regulate ICOs.

The Judge said that it would come down to the jury to determine whether an ICO before the court was a security. However, he concluded that the allegations in the case before him would have supported the finding. The ruling was on the Zaslavsiky’s ICOs. However, if it holds up on appeal, it might have far-reaching implications.

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