Two Fraudulent ICOs

FBI Arrests Banker’s Brother for Stealing $300,000 in Two Fraudulent ICOs

Maksim Zaslavskiy, a 38-year-old businessman, essentially pushed two fraudulent ICOs he claimed were backed by real estate and diamond investments when in reality they were just scams he was using to make himself rich.

One of the ICOs, for REcoin, was promoted as the “first ever cryptocurrency backed by real estate.” Investors would reportedly profit from owning the cryptocurrency through the company’s investments in the U.S., Europe, Canada, Australia, and Japan, according to court papers.

 The other one, known as Diamond Reserve Club, was supposed to be backed by diamonds held in “secure locations” that would allow investors to profit. In a statement, acting U.S. attorney Bridget M. Rohde stated that “Zaslavskiy knew that no real estate or diamonds were actually backing the investments.”

Assistant director-in-charge at the Brooklyn U.S. attorney’s office, William Sweeney, stated:

“As alleged, Zaslavskiy and associates led their victims to believe they were hedging their bets on cryptocurrency secured by real estate and diamond investments.”

According to Bloomberg, U.S. Magistrate Judge Ramon Reyes later released Zaslavskiy on a $250,000 bond secured by his family’s house and co-signed by both his parents and his brother Dmitry, a big-shot executive at Morgan Stanley who during the hearing claimed to make $450,000.

Last month, the U.S. Securities and Exchange Commission (SEC) sued Zaslavskiy over the same allegations. Although it was one of the first cases in which the regulator sued someone over fraud in ICOs, various outlets pointed out it may not be the last one.

In its statement, the SEC accuses the businessman of selling unregistered securities and coins that do not exist to unsuspecting investors, using companies that were defrauding them. The regulator also pointed out Zaslavskiy promised “sizeable returns” from each ICO, while misstating how invested money would be used, and misrepresenting how much had already been invested.

According to CoinSchedule, ICOs this year have already raised over $3.25 billion, some of them with little more than a whitepaper to show for it. As if using fake cryptocurrency exchange apps and cryptocurrency-stealing malware wasn’t enough, some fraudsters try to get other people’s money with fraudulent ICOs.