SEC makes first fraud charges against an initial coin offering

SEC makes first fraud charges against an initial coin offering”

The SEC complaint alleges that Maksim Zaslavskiy and his companies have been selling unregistered securities, and the digital tokens or coins being peddled don't really exist. The two companies that are mentioned in the report are REcoin Group Foundation and DRC World (also known as Diamond Reserve Club).

His numbers were "simply not true" according to the SEC's complaint, which noted that the REcoin tokens had never been developed.

The SEC obtained an emergency court order to freeze the assets of Zaslavskiy and his companies.

In his pitch Zaslavskiy told investors REcoin ICO proceeds would be directed toward real estate by a team of industry professionals comprised of attorneys, brokers and accountants. In truth, none of these professionals had been hired, or consulted.

Meanwhile he painted the diamond business as one that invests in the precious metal at a discount from product retailers, savings that were then supposed to be passed along to investors with memberships in DRC. Zaslavskiy also reportedly told potential investors that REcoin had already raised between $2 million and $4 million, but the actual amount he had raised was closer to $300,000. Despite their representations to investors, the SEC alleges that Zaslavskiy and Diamond have not purchased any diamonds nor engaged in any business operations.

"Investors should be wary of companies touting ICOs as a way to generate outsized returns". Yet they allegedly continue to solicit investors and raise funds as though they have.

The SEC recently indicated its intent to crack down on ICOs that are deemed securities but have not filed for an appropriate exemptions.

Earlier this year, ICOs were declared illegal by the People's Bank of China, the nation's securities regulator, due to concerns regarding financial fraud and general criminal activity.

Back in August, REcoin's ICO launched under the premise that its token was the first ever to be backed by real estate. While REcoin's ICO was being promoted as being backed by real estate, DRC's was being said to be backed by diamonds.

Today, the Securities and Exchange Commission (SEC) announced in an official report that civil actions were being brought against two companies for violating anti-fraud and registration provisions of federal securities laws. The SEC seeks permanent injunctions and disgorgement plus interest and any applicable penalties.

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