The world of blockchain and cryptocurrencies may appear to be flourishing on the outside, but there’s a lot of shady stuff going on behind the scenes. Last month, the Securities and Exchange Commission or SEC in the U.S. managed to foil plans of a certain Maksim Zaslavskiy, who planned to defraud investors through two apparent Ponzi schemes disguised as initial coin offerings or ICOs.
According to the SEC’s official press release, the two fraudulent ICOs in question are for REcoin, which was touted as “the first-ever cryptocurrency backed by real estate,” and DRC or Diamond Reserve Club, which was supposedly investing in diamonds. Investors were apparently told that they could expect “sizable returns” from the ensuing operations but the reality was that there was nothing backing either of these.
Apart from lying about the potential earnings that investors could make in the two ICOs, the perpetrators also boasted about having a “team of lawyers, professionals, brokers, and accountants,” many of whom will be instrumental in furthering the future of any and all investments. And what’s more, it’s alleged that they misrepresented the amount of money raised between the two schemes from investors, where the $2 million to $4 million amount was a fabrication and the actual amount was only around $300,000.
Only recently, the SEC’s Office of Investor Education and Advocacy issued an investor alert, which was about the risks of ICOs. You can find the full text of this here.
Andrew Calamari, Director of the SEC’s New York Regional Office, said this in a statement:
“Investors should be wary of companies touting ICOs as a way to generate outsized returns. As alleged in our complaint, Zaslavskiy lured investors with false promises of sizeable returns from novel technology.”
As of this time’s writing, the SEC has already obtained an emergency court order to freeze the assets of Zaslavskiy and all of his companies. But it’s unclear at this point how the victims of this allegedly fraudulent scheme will be compensated for their investments in it so far.
