The Securities and Exchange Commission (SEC) has charged an entrepreneur and two firms with scamming investors in a pair of initial coin offerings (ICOs) supposedly backed by tangible investments including diamonds and real estate, according to a press release the SEC sent to CoinReport.
The SEC alleges that Maksim Zaslavskiy and his firms have been selling unregistered securities, and the digital coins being sold don’t really exist. According to the SEC’s complaint, investors in DRC World (aka Diamond Reserve Club) and REcoin Group Foundation have been told they can expect considerable earnings from the firms’ operations, while neither has any real operations.
Zaslavskiy purportedly touted REcoin as “The First Ever Cryptocurrency Backed by Real Estate.” Alleged misstatements to REcoin investors involved the statement that the firm had a “team of lawyers, professionals, brokers, and accountants” that would invest the ICO proceeds of REcoin into real estate, while in effect none had been employed or even consulted. REcoin and Zaslavskiy purportedly misrepresented they had raised between $2 million and $4 million from investors, while the real sum is nearly $300,000.
Zaslavskiy, according to the SEC’s complaint, passed his system over to Diamond Reserve Club, which allegedly invests in diamonds and gets discounts with product retailers for individuals who buy “memberships” in the firm. In spite of their representations to investors, the SEC alleges that Diamond and Zaslavskiy have not bought any diamonds nor engaged in any commercial operations. Yet they purportedly keep soliciting investors and raising finances like they have.
The SEC got an emergency court order to freeze the assets of Zaslavskiy and his firms.
The SEC’s Office of Investor Education and Advocacy recently released an investor alert cautioning about the risks of ICOs.
Andrew M. Calamari, director of the SEC’s New York Regional Office, said in the release we received, “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.”
The SEC’s complaint was filed in federal district court in Brooklyn, N.Y. It accuses Zaslavskiy, REcoin, and Diamond of violating the registration and anti-fraud provisions of the federal securities laws. The complaint seeks perpetual injunctions and disgorgement plus penalties and interest. The SEC seeks for Zaslavskiy an officer-and-director bar and a bar from taking part in any digital securities offering.
Valerie A. Szczepanik, Pamela Sawhney and Jorge Tenreiro have conducted the ongoing SEC investigation. Lara S. Mehraban is overseeing the case. The SEC encourages victims of the alleged fraud to contact Ms. Szczepanik at (212) 336-1100.
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