Defendant in First ICO Fraud Case Pleads Guilty


On 15 November 2018, Bloomberg reported that Maksim Zaslavskiy, the defendant in the first fraud case involving initial coin offerings (ICOs), pleaded guilty. The case is U.S. v. Zaslavskiy (1:17-cr-00647), U.S. District Court, Eastern District of New York.

Zaslavskiy was charged in November 2017 on three counts of securities fraud in connection with two ICOs: “REcoin” and Diamond Reserve Coin (DRC). The Department of Justice (DOJ) claimed that Zaslavskiy had lied to investors when selling these two cryptoassets. According to the indictment, he told investors that both of these were backed by real world assets: real estate in the case of REcoin and diamonds in the case of DRC.

In February 2018, Zaslavskiy’s legal team made a motion to dismiss the case on the grounds that (a) he had not committed securities fraud since REcoin and DRC were not securities; and (b) the securities laws are so vague that it would be unreasonable to expect an ordinary person to know that his alleged conduct was unlawful.

 As covered by CryptoGlobe, on 11 September 2018, the court denied this motio, with the judge ruling that, assuming all of the DOJ’s allegations are true, REcoin and DRC are securities, and securities laws are not so vague as to be unconstitutional. This meant that the case would be going to trial.

The Bloomberg report says that Zaslavskiy told the federal court: “I, along with others, made these false statements to obtain money from investors.” With regard to REcoin, he reportedly said: “We had not yet purchased any real estate.” And apparently, with regard to DRC, he admitted: “We had not purchased any diamonds.”

On 19 April 2018, when Zaslavskiy is due back in court for sentencing, he faces up to 37 months in prison.

Mildred Whalen, the defendant’s lead attorney, said after the hearing:

“This is a case where he had a good-faith belief in his cryptocurrency products, but he marketed it as further along than what had been actually developed.”

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