Crypto scam organizer will face five years in prison - the first
|- The US Eastern District Court reached the verdict on ICO scam case.
- REcoin Group Foundation, LLC (REcoin) and DRC World, Inc founder used ICO scheme to defraud investors.
- He will spend up to five years in jail and may be sublect to a fine.
The citizen of Brooklyn with Ukrainian origin Maksim Zaslavskiy admitted the fault of defrauding investors through two initial coin offerings campaigns - for REcoin Group Foundation, LLC (REcoin) and DRC World, Inc., also known as Diamond Reserve Club (Diamond). He can spend the next five years in prison, Bloomberg reports, citing the court documents dated November 15.
Old-fashioned scam with new dressing
Zaslavskiy used a good old scheme of luring investors with false statements and juicy promises. He claimed that is RECoins is the first world's cryptocurrency backed by real estate, while the Diamond token is supported by real diamonds. Neither of the statements was true as the collateral never existed.
The businessman also claimed that RECoin is backed by a dream-team of professional lawyers, brokers, and accountants who reinvest the funds raised during Recoin ICO in real estate, which was another blatant lie.
According to the marketing materials placed on the website of the project, the company sold over 2.8 million tokens and raised about $4 million; however, in reality, he managed to gather only $300,000 as only 1000 investors had put money into his fraudulent scheme.
A year-long case
The US Securities and Exchanges Commission (SEC) brought charges against Zaslavskiy over a year ago, but he pleaded not guilty, while Zaslavskiy’s lawyers declared that securities laws did not apply to cryptocurrencies.
However, the U.S. District Judge Raymond Dearie decided otherwise saying that “simply labeling an investment opportunity as ‘virtual currency’ or ‘cryptocurrency’ does not transform an investment contract— security—into a currency.”
What's in store for Zaslavskiy
Maksim Zaslavskiy pleaded guilty to conspiracy to commit securities fraud through deliberate misrepresentations made to convince investors to put in money in REcoin and DRC schemes, which carries a penalty of maximum five years in prison.
Earlier this year, prosecutors added a new charge of conspiracy to commit wire fraud, which carries a maximum 20-year prison term, to the two counts of securities fraud and conspiracy charges he’d already faced.
Apart from that, Zaslavskiy may have to pay a fine to the Securities and Exchange Commission as the regulator also filed civil charges against him.
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