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SEC Announces Charges Against Businessman and Two Companies in ICO Scam

On September 29th, 2017, the Securities and Exchange Commission (SEC) announced investment fraud charges against Maksim Zaslavskiy. According to federal investigators, Mr. Zaslavskiy, through two companies that he controlled, fraudulently sold unregistered securities to unsuspecting investors. This case is notable as it involved initial coin offerings (ICOs), a new type of securities product backed by so-called cryptocurrencies.

As cryptocurrencies (and related financial products) have started to become of interest to mainstream investors, federal regulators at the SEC are beginning to pay closer attention. This is the first time that the SEC has filed civil fraud charges against an ICO company. Here are the basics of this case.

Fraud: Cryptocurrencies Backed by Real Estate and Diamonds 

Maksim Zaslavskiy marketed his investment products as highly innovative, with limited risk and potential for well-above-market returns. His product REcoin was presented to investors as the world’s first cryptocurrency backed by real estate holdings, and he also marketed unregistered ICO securities that were supposedly backed by holdings in diamonds.

However, both ventures were a scam. Upon review and investigation, SEC officials allege that the cryptocurrencies being offered by Mr. Zaslavskiy never actually existed at all. There was no cryptocurrency being generated or invested in any real estate holdings or precious metals.

Yet, investors were being told to expect to receive a substantial return from the nonexistent operations of these two companies. While Mr. Zaslavskiy explicitly told investors that his companies employed a team of “attorneys, real estate brokers, and accountants,” in reality, there were no such professionals involved in the scams. In all, SEC investigators believe that these companies took in at least $300,000 in investor money on wholly false pretenses.

SEC Investor Alert: Initial Coin Offerings (ICOs) 

This case comes just over one month after the SEC released a public alert to all investors, warning them about the risks of ICOs. This is still a relatively new area of regulation, and the agency is continuously monitoring cutting-edge financial products to see which industry rules, if any, need to be modified. That being said, the SEC made it clear in its alert that it expects ICOs to be used as a conduit to commit fraud. This is not to say that all of these investments are inherently illegitimate, but that it is important for investors to use the highest level of precaution when investing in unusual or exotic products. Remember, any complex investment product that offers high returns with low risk should be viewed with extreme skepticism.

Contact Our Top-Rated Investment Fraud Attorneys Today  

At Carlson & Associates, P.A., we know that fraudsters use many different methods and means to take money from innocent investors. Our lawyers always stay up to date on the latest tactics and schemes used by scammers. If you were a victim of fraud, please call us today to set up a confidential review of your claim. Our firm is based in Miami, and we represent investors from the United States and Latin America, including Brazil, Peru, Dominican Republic, Venezuela, Columbia and Mexico.

 

Resources:

sec.gov/news/press-release/2017-185-0

sec.gov/oiea/investor-alerts-and-bulletins/ia_icorelatedclaims

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