The SEC alleges that Maksim Zaslavskiy and his companies have been peddling digital tokens or coins that don’t exist.
The two companies are Recoin Group Foundation and DRC World, also known as Diamond Reserve Club. Investors were told they could expect sizeable returns despite neither company having any real operations.
Properties and bling
REcoin was touted by Zaslavskiy as “the first ever cryptocurrency backed by real estate”.
Investors were told a host of lies, including 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 told investors he had raised between $2m and $4m, when the actual amount was around $300,000 (£223,846, €253,905) from “hundreds of investors”, the SEC report said.
The scheme was later carried over to DRC World, which claimed to invest in diamonds and obtained discounts with product retailers for individuals who purchase “memberships” in the company.
Despite their representations to investors, the SEC alleges that Zaslavskiy and DRC World did not purchased any diamonds or engage in any business operations.
Lured with false promises
The SEC has obtained an emergency court order to freeze the assets of Zaslavskiy and his companies.
“Investors should be wary of companies touting ICOs as a way to generate outsized returns,” said Andrew Calamari, director of the SEC’s New York regional office.
“As alleged in our complaint, Zaslavskiy lured investors with false promises of sizeable returns from novel technology.”
Warning
The action taken by the SEC follows a warning posted on its website in July.
The regulator’s office of investor education and advocacy issued this statement: “Developers, businesses, and individuals increasingly are using initial coin offerings, also called ICOs or token sales, to raise capital. These activities may provide fair and lawful investment opportunities.
“However, new technologies and financial products, such as those associated with ICOs, can be used improperly to entice investors with the promise of high returns in a new investment space.”
It added: “Fraudsters often use innovations and new technologies to perpetrate fraudulent investment schemes. Fraudsters may entice investors by touting an ICO investment ‘opportunity’ as a way to get into this cutting-edge space, promising or guaranteeing high investment returns.
“Investors should always be suspicious of jargon-laden pitches, hard sells, and promises of outsized returns. Also, it is relatively easy for anyone to use blockchain technology to create an ICO that looks impressive, even though it might actually be a scam.”
