07 July 2020 - Events
The SEC recently civilly charged one individual and two of his companies with defrauding investors in connection with initial coin offerings (ICOs), signaling its priority focus on ICOs along with cybersecurity issues. The SEC sought permanent injunctions and disgorgement (plus interest and penalties) and to bar the individual from certain activities. The SEC alleged that, in mid-2017, Maksim Zaslavskiy and his companies REcoin Group Foundation and DRC World committed fraud by selling unregistered securities in ICOs for digital coins that did not actually exist. REcoin was advertised as “The First Ever Cryptocurrency Backed by Real Estate” and claimed to have a team of professionals prepared to invest the raised funds in real estate (and that investors could expect sizeable returns). The SEC alleged that no such team of professionals existed nor had any team been consulted and that REcoin misrepresented that it had raised between $2 million and $4 million instead of the approximately $300,000 that it had actually raised. The SEC alleged that, while DRC World claimed to invest in diamonds (having solicited investors and raised funds based on this claim), no such investments were made nor had DRC World engaged in any business operations. The SEC's approach to these proceedings appears to signal that the SEC will assume that ICOs involve securities unless the persons engaging in the ICO demonstrate otherwise. For more information, see “https://www.sec.gov/news/press-release/2017-185-0”:“https://www.sec.gov/news/press-release/2017-185-0 (charges) and” https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_coinofferings”:https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_coinofferings (July 2017 SEC investor alert warning about the risks of ICOs).