REcoin Group Foundation DRC World ICO SEC fraud charges cryptocurrency



bitcoin
SEC charged a man for
allegedly running two fraud ICOs.

Ethan Miller/Getty Images

The Securities and Exchange Commission has charged a man and
two companies for operating fraudulent initial coin
offerings. 

According to a statement
released Friday
, the financial watchdog
alleges Maksim Zaslavskiy and his two companies,
REcoin Group Foundation and DRC World, defrauded investors
and sold unregistered securities in two fake ICOs.

REcoin, a blockchain-based real-estate company, and DRC
World, a diamond membership club, issued fake tokens to investors
and promised high-returns without “real operations,” according to
the SEC. 

ICOs allow startups to raise money by issuing
their own cryptocurrencies.

Recently, ICOs have
come under scrutiny by regulators because companies can
use them to raise quick money without having to
disclose substantive information to investors. 

The SEC said REcoin misled investors, saying it had a “team
of lawyers, professionals, brokers, and accountants” who
would handle all real-estate investments when no such team
existed. 

Similarly, DRC World was a shell, according to the SEC. The
company falsely told investors that it had a inventory of
diamonds when it did not. 

“Investors should be wary of companies touting ICOs as a way to
generate outsized returns,” said Andrew Calamari, director
of the SEC’s New York regional office.”As alleged in our
complaint, Zaslavskiy lured investors with false promises of
sizeable returns from novel technology.”

The SEC froze the personal assets of Zaslavskiy and his
companies after getting an emergency court order, according to
the agency.

In July, the
SEC
 announced certain ICOs would be subject to
regulatory scrutiny. Other countries, such as China and
South Korea
, have deemed initial coin offerings illegal,
because of concerns of fraud.

The market for ICOs has exploded this year with over $2
billion raised, according to data from Autonomous
NEXT. 

Schwark Satyavolu, a general partner at Trinity Ventures, a
venture capital firm, is a ICO skeptic who told Business Insider
he thinks there’s a bubble in the market. 

“If investments continue at the current rate, this could
become the next mortgage crisis with people – including
institutional investors – losing hundreds of millions of dollars
when (not if) many of these companies go out of business,”
Satyavolu said. 

Still, many market-watchers are excited about the potential
of ICOs, despite the bad actors. 

“There’s always a few bad apples out there, but on the
majority, blockchain leaders and CEOs are doing great things to
financial services, supply chain, logistics, healthcare,
agriculture, real estate, biotech, data, retail and government
operations,” Perry Woodin, the CEO of Node40, a
blockchain technology company, said in a statement emailed to
Business Insider. 



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