NY Court reschedules sentencing of Maksim Zaslavskiy in ICO fraud case

Maria Nikolova

Sentencing of Maksim Zaslavskiy is rescheduled to May 20, 2019.

The sentencing of Maksim Zaslavskiy, who has pleaded guilty to conspiracy to commit securities fraud in connection with two Initial Coin Offerings (ICOs), has been adjourned. An electronic order filed with the New York Eastern District Court on Tuesday, March 12, 2019, grants the request submitted by the defendant’s counsel about rescheduling the sentencing due to personal matters.

The sentencing, initially scheduled for April 19, 2019, is rescheduled to May 20, 2019.

In November 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).

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 in 2018, 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, the Securities and Exchange (SEC) has filed civil charges against Zaslavskiy. The civil case was stayed pending resolution of the criminal matter.

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