On September 29, 2017, the Securities Exchange Commission announced that businessman Maksim Zaslavskiy and his two companies (RECoin and Diamond Reserve Club World) have been charged with defrauding investors in a pair of token offerings supposedly backed by real estate and diamonds respectively.
The SEC has obtained an emergency court order to freeze assets belonging to Zaslavskiy and his companies after filing a complaint with a federal district court in Brooklyn, N.Y., charging RECoin and DRC World with violations of anti-fraud and registration provisions of federal securities law. The SEC seeks permanent injunctions and disgorgement plus interest and any applicable penalties.
Per the release, "The SEC alleges that Maksim Zaslavskiy and his companies have been selling unregistered securities and the digital tokens or coins being peddled that don't really exist." Investors were told to expect sizeable returns from the companies' operations, but no such operations existed according to the SEC’s complaint.
Zaslavskiy allegedly advertised REcoin as "The First Ever Cryptocurrency Backed by Real Estate." The SEC further alleges that Zaslavskiy falsely claimed to investors that REcoin had "a team of lawyers, professionals, brokers, and accountants" who would invest token offering proceeds in various real estate ventures. In truth, none of these professionals had been hired, or consulted. In addition, Zaslavskiy allegedly misrepresented the amount raised from investors as between $2 million and $4 million when only $300,000 was raised in reality.
Zaslavskiy reportedly used the same scam in a separate venture that claimed to invest in diamonds by exploiting retailer discounts for "membership" holders. Again, the SEC asserts that DRC World neither purchased diamonds nor engaged in any business operations.
Andrew M. Calamari, Director of the SEC's New York Regional office issued this warning to investors: "Investors should be wary of companies touting ICOs as a way to generate outsized returns. As alleged in our complaint, Zaslavskiy lured investors with false promises of sizeable returns from novel technology."