In another news of what could rock the crypto industry, an ICO scammer from Brooklyn has been imprisoned for 1.5 years. Reportedly, Maksim Zaslavskiy ran two deceptive ICO projects, and for the same, he has been sentenced to imprisonment for 1.5 years. This ruling makes his case the very first one on which federal securities law on cryptocurrency became applicable.
While the US is still lagging as far as the regulations and laws relating to cryptocurrencies are concerned, fraudulent ICOs are not that difficult to tackle. This is mainly because many of the ICOs are now considered securities. One of such cases was resolved on November 18th, when Maksim Zaslavskiy, a businessman from Brooklyn, was imprisoned for one and a half years.
Zaslavskiy has earned quite a reputation for fraud token sales, which could jeopardise the future of ICO. He was held accountable for two fraudulent token sales that took place in November 2019. During the said period, he sold securities as he confessed to the authorities on being caught. Furthermore, he admitted his claims that diamonds and real estate backed Diamond Reserve Club and REcoin were utterly false. In actuality, Zaslavskiy bought neither diamonds nor real estate. The certificates that he offered to the investors were all fake and worthless. Apart from this, Zaslavskiy also confessed that he misled investors by advertising that REcoin was backed by a team of professionals, lawyers, accountants, and brokers who would go on to judiciously invest the proceeds in real estate. He even claimed to other investors that 2.8 million REcoins had been sold.
Deceptive ICO Considered a Major Security Fraud
Richard P. Donoghue, the US attorney for Eastern District of New York, terms this act by Zaslavskiy an ‘outdated fraud’. However, the ICO scammer was smart enough to camouflage it and make it appear like the state-of-the-art technology.
Simply putting it, Zaslavskiy went on to sell tokens that did not even exist. It is evident that he intended to trick innocent investors into depositing their money for the coins. The charges for conspiracy and fraud were raised against him way back in late 2017. Up until September 2018, he continued to fight these charges, but all his pleas were dismissed.
In his defence, Zaslavskiy claimed that he did not offer the ICO tokens as securities which meant that his case should not fall under the laws for securities fraud. During the said period, the ruling of the court was that the jury should determine whether or not the coin offerings were in actual securities or not. However, before further proceedings, Zaslavskiy decided to plead guilty in court by making a deal. As per the said deal, he agreed that he would not appeal a sentence that is below 3.5 years. The court ordered him to return some amount of money to the investors who had taken part in the token sales. Although the court might have handed the ICO scammer a reduced sentence, this incident has severely dented the belief of several ICO investors.