First ICO Fraud Case in the U.S. Results in 18-Month Prison Sentence

This marks the first time the U.S. Securities and Exchange Commission (SEC) has enforced and set a precedent by sentencing Brooklyn businessman Maksim Zaslavskiy to 18 months in prison on 11/18 for conspiring to commit securities fraud through his 2017 ICO scheme.

The case involves his two fraudulent investment schemes, Diamond Reserve Club World and REcoin Group Foundation. According to a report by Law360 on 11/18, these two scams were promoted as backed by diamonds and real estate, but these collateral did not exist. Zaslavskiy also pleaded guilty in November 2018 for conspiring to commit securities fraud.

Over a Thousand Investors Deceived

Zaslavskiy attempted to lure real estate investors, estimating that about 1,000 people were defrauded, investing at least $300,000 in the summer of 2017 in the fraudulent ICO scheme. U.S. Attorney for the Eastern District of New York, Richard P. Donoghue, stated in a release:

Zaslavskiy perpetrated a classic bait-and-switch on investors, promising returns on cutting-edge technology. We will continue to investigate and prosecute those who defraud investors, whether involving traditional securities or virtual currency.

Although Zaslavskiy attempted to refund the money he defrauded from his ICO, PayPal froze his account out of concerns that ICO payments were made using stolen or fraudulent credit cards. Federal Judge Raymond Dearie concluded:

You are a thief, you stole from people, you pretended to own things that were not yours, and this case involves new technology and new currency, but lying or outright fraud is nothing new.

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