SEC seeks Court’s approval of settlement with Maksim Zaslavskiy, REcoin, DRC World

Maria Nikolova

The proposed judgments would permanently bar Zaslavskiy from serving as an officer or director of any public company and from participating in any offerings of digital securities.

The United States Securities and Exchange Commission (SEC) today filed a set of documents with the New York Eastern District Court, requesting the Court’s approval of proposed consent judgments concerning Maksim Zaslavskiy, REcoin Group Foundation, LLC, and DRC World, Inc., a/k/a Diamond Reserve Club.

The regulator explains that the parties in this case have reached a partial settlement, subject to the Court’s approval.

The proposed judgments are set to resolve the defendants’ liability in the action and all non-monetary relief the SEC seeks against the defendants. Specifically, the judgments would permanently enjoin the defendants from violating (1) Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and (2) Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and would permanently bar Zaslavskiy from serving as an officer or director of any public company pursuant to Section 20(e) of the Securities Act and Section 21(d)(2) of the Exchange Act, and from participating in any offerings of digital securities.

Because Zaslavskiy is scheduled to be sentenced in a related criminal case and because it is likely that the outcome of that proceeding will impact the timing and amount of monetary relief the Commission will seek, the proposed judgments do not resolve the monetary relief the SEC would request. Instead, the judgments would permit the regulator to move for disgorgement, prejudgment interest, and civil penalties against the defendants.

Let’s recall that the SEC launched its action against Zaslavskiy and his two companies on September 29, 2017. The regulator charged the defendants with defrauding investors in a pair of Initial Coin Offerings (ICOs) purportedly backed by investments in real estate and diamonds.

The SEC alleges that Maksim Zaslavskiy and his companies have been selling unregistered securities, and that the digital tokens or coins being peddled don’t really exist. According to the SEC’s complaint, investors in REcoin Group Foundation and Diamond (also known as Diamond Reserve Club) have been told they can expect sizeable returns from the companies’ operations when neither has any real operations.

Zaslavskiy allegedly touted REcoin as “The First Ever Cryptocurrency Backed by Real Estate.” Alleged misstatements to REcoin investors included that the company had a “team of lawyers, professionals, brokers, and accountants” that would invest REcoin’s ICO proceeds into real estate when in fact none had been hired or even consulted. Zaslavskiy and REcoin allegedly misrepresented they had raised between $2 million and $4 million from investors when the actual amount is approximately $300,000.

According to the SEC’s complaint, Zaslavskiy carried his scheme over to Diamond, which purportedly invests in diamonds and obtains discounts with product retailers for individuals who purchase “memberships” in the company. Despite their representations to investors, the SEC alleges that Zaslavskiy and Diamond have not purchased any diamonds nor even identified any storage location. Yet they allegedly continue to solicit investors and raise funds as though they have.

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