The Enforcement Division of the Securities and Exchange Commission (SEC) has shut down an Initial Coin Offering (ICO) that claimed to allow investors to participate in an offer backed by diamonds and real estate. The SEC has charged REcoin Group Foundation, DRC World, Diamond Reserve Club, and Maksim Zaslavskiy with attempting to sell unregistered securities. The SEC complaint shares that tokens offered to investors never even existed. The Digital Coins were, perhaps, a digital con. The SEC obtained an emergency court order to freeze the assets of Zaslavskiy and his companies.
According to the SEC, Zaslavskiy allegedly touted REcoin as “The First Ever Cryptocurrency Backed by Real Estate.” Zaslavskiy allegedly told REcoin investors the company had a “team of lawyers, professionals, brokers, and accountants” that would invest REcoin’s ICO proceeds into real estate. Of course, no one had been hired nor even consulted. Zaslavskiy and REcoin allegedly misrepresented they had raised between $2 million and $4 million from investors when the actual amount is approximately $300,000.
The similar process was used for the Diamond Reserve Club where investors were said to purchase memberships in the company.
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,” said Andrew M. 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.”
The SEC recently indicated its intent to crack down on ICOs that are deemed securities but have not filed for an appropriate exemption. Additionally, the SEC has posted a warning regarding ICOs in general as the sector has been rampant with fraud. The RECoin offering is a prime example of how easily individuals may be duped by a slick pitch and an affiliated web site.
RECoin issued a press release in July where Zaslavskiy claimed to be a “real estate guru”. REcoin was described as a new, proprietary cryptocurrency designed for a broad range of financial transactions, while being backed by real estate held by 101REcoin Trust in countries with a developed and stable economy such as the U.S., Canada, Japan, Great Britain and Switzerland.
Zaslavskiy, who is originally from the Ukraine, was defending his ICO earlier this month stating;
“It is a glorious and exciting time, everybody! I hope we all enjoy it, cease the opportunity it brings us, and remain partners, colleagues and friends for many, many prosperous years to come!”
Unfortunately, for any investors it does not appear that prosperity generated by RECoin was only intended for the creator.
The SEC’s complaint, filed in federal district court in Brooklyn, N.Y., charges Zaslavskiy, REcoin, and Diamond with violations of the anti-fraud and registration provisions of the federal securities laws. The SEC complaint seeks permanent injunctions and disgorgement plus interest and penalties. For Zaslavskiy, the SEC also seeks an officer-and-director bar and a bar from participating in any offering of digital securities.
The SEC Complaint is embedded below.
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