The internet allows a certain anonymity; it also allows to be who we want to be. Maksim Zaslavskiy portrayed himself as a real estate guru, a philanthropist providing global humanitarian, a veteran of Wall Street and the author of three books.
Authorities are claiming that 38-year-old Zaslavskiy scammed investors through two initial coin offerings, REcoin and DRCWorld.
Prosecutors accused Zaslavskiy of raising upwards of $300,000 from the REcoin, which Zaslavskiy pitched as being backed by real estate. Another crypto coin that the Brooklyn resident launched was called Diamond, which he claimed was backed by physical diamonds.
Thousands of people invested in the ICOs, yet there is no proof that any digital asset or token was ever issued to any of the investors.
Although DRCWorld was registered in Las Vegas, Zaslavskiy is not facing a Las Vegas Securities fraud charge.
The U.S. Securities and Exchange Commission is pursuing a federal case and a civil case against Zaslavskiy. The SEC has already gone on record of saying that cryptocurrencies could be treated as securities and may be regulated as such.
Following an appearance on Wednesday afternoon in Brooklyn federal court, Zaslavskiy was released on a $250,000 bond. If convicted, he could face up to five years prison time.
What this can mean for ICOs is the start of a much needed clear up. The SEC appears to be slowly and carefully separating the scam ICOs from the legit coin offerings. However, without overarching regulation or a total ban, the SEC and other regulatory bodies cannot keep up with the pace and the popularity of ICOs. Over $5.6 billion was raised through ICOs in 2017, but already there has been $2 billion raised so far this year. With the impending Telegram ICO expected to raised $2 billion all by itself, 2018 looks on course to comfortably exceeding last year's total.
Peter Van Valkenburgh, research director for blockchain advocacy Coin Center, said, "Many token sales are outright securities fraud that differ little from a typical pyramid or Ponzi scheme."
“We're happy to see the SEC carefully separating the wheat from the chaff with respect to these ICOs, investigating and putting a stop to predatory offers that promise exorbitant returns and guarantee investors won't lose money," he said.
ICO scams have caught the eye of a few governments and multinational platforms. Facebook, Twitter and LinkedIn all announced bans on ICO advertising, while Google has stopped ICO advertising on its platforms as of June this year. Leading email service provider MailChimp recently banned ICO marketing through its email platform and more publishers are expected to follow suit.
The case of Zaslavskiy is important. and it is one of the first of its kind. Whether or not it has far-reaching implications for ICOs as a whole remains to be seen. However, what we are seeing is the need for regulation and more prosecutions to really end the Wild West days of ICOs
Disclosure: Author does not have any stake in the listed equities.
