A federal judge in Brooklyn has ruled that prosecutors may proceed with a case against one man running scam ICOs for breaking securities laws. The man allegedly claimed diamonds and real estate backed his initial coin offerings.
ICOs Under Constant Scanner
The case against the man appears to be reasonably ironclad, leaving some observers concerned that legal precedent may be interpreted broadly enough to affect other ICOs that are not scams.
Lack of regulation has been both a boon and a handicap for crypto. The explosive growth of the market has created untold new millionaires, and decentralized currencies have enabled many international transactions to escape the delays and fees charged by banks.
Many projects are also promising revolutions in technology, although these are so far all works in progress. On the other hand, the lack of regulation has made space a perfect playground for scammers, often leaving victims of crime with no real recourse for justice, and no hope of reclaiming lost property.
In the case of Maksim Zaslavskiy, a businessman from Brooklyn, it appears we have a clear case of fraud. Zaslavskiy sold and promoted two cryptocurrencies which he claimed were backed by diamonds and real estate. According to police and prosecutors, neither diamonds or real estate were ever real, and the sales were scams. In fact, it appears even the coins were not real, as no tokens were delivered to investors.
Zaslavskiy was charged with conspiracy and two counts of securities fraud. Zaslavskiy argued that he could not be so charged because the (nonexistent) tokens he sold were currencies, not securities. As reported by Bloomberg, U.S. District Judge Raymond Dearie ruled that Zaslavskiy can make his case to the jury, but that prosecutors may proceed with their case.
It appears all but certain that Zaslavskiy is a fraudster, but the choice by prosecutors to charge him under securities laws has left some observers worried that, if the jury votes to convict, precedent may be set that ICOs of all kinds may be considered securities, rather than just the two obvious scams run by mister Zaslavskiy.
With about $18.7 billion raised by ICOs so far this year and near enough every project in crypto swearing up and down that their tokens should not be considered securities (though some exceptions exist), this will be an interesting case to follow.