SEC Brings First Fraud Charges Involving Initial Coin Offerings

With the rise in popularity of Bitcoin and the cryptocurrency market, initial coin offerings are becoming more prevalent investments options that appeal to investors who are not fully aware of the risks associated with investing in this largely unregulated market.

Initial coin offerings (ICOs) are similar to initial public offerings (IPOs) except that investors are offered digital tokens, like Bitcoins, instead of stock. If these tokens grow in popularity and attract interest, their value may surge, allowing investors to potentially make a profit. To date, companies have raised more than $2 billion globally from ICOs.

ICOs are susceptible to fraudsters looking to take advantage of investors.

While the opportunity to invest in these newly popularized investment vehicle may seem appealing, it is not without hazards. Like many popular investment options, ICOs are susceptible to fraudsters looking to take advantage of unwary investors who often do not fully understand the mechanics of an ICO.

Recently, the Securities and Exchange Commission (SEC) brought an action against two companies that defrauded investors through ICOs purportedly backed by real estate and diamonds.

According to the SEC’s complaint, the defendants, Maksim Zaslavskiy and his companies REcoin Group Foundation and DRC World, Inc., fraudulently sold investors digital tokens that did not actually exist. Zaslavskiy proclaimed that the tokens his companies marketed would appreciate in value in accord with REcoin’s real estate assets and DRC’s diamond assets, and that investors could expect large returns as a result. The SEC discovered, however, that neither of the companies had any real operations and there were no real estate or diamond assets.

If you have suffered significant financial losses from investing in an ICO or Bitcoin fraud, or are unsure whether you invested into a scam, the Business Trial Group may be able to help. Our clients pay no upfront fees or retainers, and we only receive a fee if we successfully recover compensation on your behalf.

For a no cost and no obligation case review, please call us at (877) 599 3102 or fill out our case review form.