ICO News: NY Businessman Charged in RE & Diamond-Backed ICO Scam

on Sep 30, 2017

If this businessman thought that an ICO tied to the diamond and real estate industries wouldn't get the attention of regulators, he was gravely mistaken. In a demonstration of its regulatory muscle, the US SEC has blocked an alleged fraudulent REcoin ICO filled with false promises of real estate properties and precious metals but no real business. Maksim (Max) Zaslavskiy and his two companies, the ReCoin Group Foundation and the Diamond Reserve Club (DRC World), were charged with an ICO scam in Brooklyn, New York. 

According to the SEC, Zaslavskiy is allegedly behind a fraudulent scheme involving unregistered securities and fake tokens, all the while promising investors “sizeable returns” from startups whose operations never got off the ground let alone generated any sales revenue. He was behind the REcoin ICO, an Ethereum-based crowdsale that was scheduled to continue through early October and which he dubbed the “first every cryptocurrency backed by real estate.”

"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,” according to Andrew Calamari, director of the SEC’s New York Regional Office.

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 fact that team of professionals was never formed.

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. In reality this was a misrepresentation as Zaslavskiy and DRC never actually purchased any diamonds or had any record of business activity, which is odd given the transparent nature of the distributed ledger technology. REcoin dubbed itself as a blockchain starutp. 

Additionally, Zaslavskiy allegedly misled investors by saying the REcoin ICO had attracted several million dollars compared to the actual results of about USD 300,000. Zaslavskiy’s assets and those of his two companies have since been frozen. ­

Fraudulent initial coin offerings feed into a stigma that has been placed on the industry by some, giving regulators more reason to step in to protect investors from potentially losing their shirts. Investors have poured some USD 2.2 billion into ICOs so far with upcoming ICOs yet to launch in Q4 2017.