Maksim Zaslavskiy faces prison term over defrauding investors in two ICOs

Maria Nikolova

Maksim Zaslavskiy pleaded guilty on Thursday to conspiracy to commit securities fraud in connection with two Initial Coin Offerings (ICOs).

As US authorities step up their efforts to put an end to cryptocurrency related fraud, there has been some development in the proceedings against Maksim Zaslavskiy.

On Thursday, November 15, 2018, Zaslavskiy pleaded guilty before United States Magistrate Judge Ramon E. Reyes, Jr. in federal court in Brooklyn to conspiracy to commit securities fraud in connection with two Initial Coin Offerings (ICOs) – REcoin Group Foundation, LLC (REcoin) and DRC World, Inc., also known as Diamond Reserve Club (Diamond).

FBI Assistant Director-in-Charge Sweeney stated that “Investing often involves risk, but nobody should be at risk of being preyed upon by unscrupulous individuals. Zaslavskiy and his associates cloaked old-fashioned criminal schemes in the language of new currency in order to take advantage of investors, and as today’s conviction demonstrates, the FBI will continue to pursue any individual who seeks to profit by exploiting others.”

As he admitted at his guilty plea, Zaslavskiy fraudulently marketed RECoin as “The First Ever Cryptocurrency Backed by Real Estate,” and subsequently touted Diamond as an “exclusive and tokenized membership pool” hedged by diamonds. In fact, Zaslavskiy bought neither real estate nor diamonds, and the certificates he sent to investors were not backed by the promised blockchain technology.

Moreover, Zaslavskiy falsely advertised that REcoin had a “team of lawyers, professionals, brokers and accountants” who would invest the proceeds from the REcoin ICO into real estate, that 2.8 million REcoin tokens had been sold (only about 1,000 investors paid for REcoin tokens) and that the investment in Diamond tokens was “hedged by physical diamonds.”

Earlier this year, United States District Court Judge Raymond J. Dearie denied Zaslavskiy’s motion to dismiss the indictment. Zaslavskiy asserted that the securities laws did not apply to cryptocurrency offerings. The court upheld the validity of the laws, noting that “there can be no serious debate” that the indictment was sufficient. The court further held that a jury was entitled to decide if REcoin and Diamond tokens were securities. This is in line with rulings in similar cases.

“Stripped of the 21st-century jargon,” the court said, referring to Zaslavskiy’s ICO marketing solicitations, the indictment described a “scam, replete with common characteristics of many financial frauds.” The court added, “simply labeling an investment opportunity as ‘virtual currency’ or ‘cryptocurrency’ does not transform an investment contract—a security—into a currency,” and does not, therefore, remove the offerings from the ambit of securities law.

Zaslavskiy faces up to five years’ imprisonment. In addition to the criminal charges filed by this Office, the Securities and Exchange has filed civil charges against Zaslavskiy. The civil case was stayed pending resolution of the criminal matter.

  • Read this next

    Industry News

    ‘WTF’ as in ‘What The Fraud?’, Sumsub’s new podcast on digital fraud

    “We found a lack of informative podcasts talking about digital fraud threats and prevention for business owners. So, we decided to dive in and share our expertise along with industry top minds in the ‘What The Fraud?’ podcast.”

    Digital Assets

    Coin Metrics integrates market data from Cboe Digital

    “We are pleased to work with Coin Metrics and believe that having quality and timely data, and systems to analyze that data, will help crypto markets mature as well as evolve to become a core component of a diversified investment portfolio. We are focused on providing access and solutions to the spot and derivatives crypto market in a way which mirrors an investor’s experience with traditional markets.”

    Fintech

    AU10TIX launches KYB solution to address regulatory requirements

    “Our customers have been requesting a comprehensive KYB solution, because money laundering and fraud have become far too prevalent in the corporate world. Our unified KYB/KYC solution is essential for identifying bad actors and maintaining a safe business environment in 2024.”

    Digital Assets

    Japan Is Rapidly Emerging As A Global Leader In Compliant Crypto Payments

    Japan is often hailed as one of the most forward-thinking nations in the crypto industry, with its government taking a very positive stance on the potential of concepts such as Web3. 

    Digital Assets

    Kraken launches institutional arm

    “If you already work with Kraken, you know how much we care about offering high quality products and a client-first experience. We’ve been the leading crypto exchange for more than a decade and through Kraken Institutional, we’ll offer the same deep expertise and cutting-edge technology to propel trading excellence for institutions.”

    Fintech

    Centroid integrates with brokerage solutions provider GTN

    “We are thrilled to integrate GTN into Centroid Bridge, our multi-asset connectivity bridging engine. This integration allows our clients to gain access to the wide range of multi-asset products offered by GTN.”

    Podcasts, Women of the Industry

    FF Podcast delves into the rise of prop trading as Brokeree releases Prop Pulse

    In the latest FinanceFeeds Podcast, Tatiana Pilipenko discusses Prop Pulse, Brokeree Solutions’ platform for prop firms and retail brokers aiming to delve into prop trading. Offering a flat fee structure, Prop Pulse emerges as a scalable solution in an era where successful traders increasingly prefer prop firms over traditional retail brokers.

    Inside View

    Scalping or day trading?

    Among the many popular trading styles with both beginners and experienced traders are scalping, which allows you to extract small portions of profit from each price movement, and day trading, which aims to trade over a single day. In this article, you will learn what scalping and day trading are and their differences and peculiarities. Ultimately, you will learn what to look for to understand which trading style is right for you.

    Crypto Insider

    Unveiling Plasma Next: INTMAX’s Solution to Scale Ethereum with Stateless Layer

     INTMAX has launched Plasma Next on the mainnet α, a groundbreaking Layer 2 zkRollup, revealed by co-founder Leona Hioki at ETH Denver. This innovation offers scalability with constant costs per block, merging Plasma’s scalability goals with zkRollups’ security.

    <