U.S. Federal Court Equates ICOs to Securities
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Sept. 12, 2018
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The Brooklyn District Court equated ICOs to issuing securities. The decision has been made as a part of Maksim Zaslavskiy’s case on a fraudulent token sale organized by the businessman.

According to Bloomberg, at a preliminary hearing, Judge Raymond Dearie agreed with the prosecution that claimed that under the federal criminal law, Initial coin offerings are equal to issuing securities. The case remains to be considered by the jury, and if they agree with this verdict, it will become a precedent for all such proceedings.

Potentially Precedent-setting ICO Fraud Case Awaits Jury Decision

The U.S. Securities and Exchange Commission (SEC) filed charges against REcoin Group Foundation and Diamond Reserve Club World for fraudulent ICOs in September last year. Businessman Maksim Zaslavskiy organized token sales that were supposedly backed by investments into various assets — real estate (REcoin) and diamonds (DRCWorld) — coordinated by a “team of lawyers, professionals, brokers and accountants”.

In reality, these assets did not exist, neither did the team supposedly collected by the entrepreneur. Zaslavskiy has been accused of misappropriating investors’ money amounting to $300 thousand. In November 2017, the businessman was taken into custody, but did not admit his guilt.

WHY IS IT IMPORTANT?

  • A decision of a federal judge in the US becomes the norm for such subsequent cases. If the order of Brooklyn's Judge remains in effect, any start-up that conducts an ICO without registering with the SEC will violate the rules of the securities placement. According to them, only professional investors can participate in the campaign, they are required to provide the final product and financial reports without fail. Token sales that have been held before in this case will not face any responsibility, since the law does not have a retroactive effect. But American crypto exchanges can be forced to remove tokens from the listing.
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