- The initial coin offerings were endorsed as being backed by diamonds and real estate.
- The ICO scam managed to attract more than 1,000 investors.
Maksim Zaslavskiy, a computer programmer from Brooklyn, was recently sentenced to a year and a half behind bars. According to a report by Law360, Zaslavskiy had been running two scam ICO’s. The initial coin offerings were endorsed as being backed by collateral (diamonds and real estate, respectively) that did not exist. Back in November 2018, Zaslavskiy was proven guilty for committing securities fraud.
Zaslavskiy presented the ICO as if it was led by experienced real estate professionals and backed by the United States property investments. It managed to attract more than 1,000 investors. They invested approximately $300,000 in the scam ICO during the summer of 2017. Richard P. Donoghue, U.S. attorney for the Eastern District of New York, said in a statement:
Zaslavskiy committed an old-fashioned fraud camouflaged as cutting-edge technology. […] This office will continue to investigate and prosecute those who defraud investors, whether involving traditional securities or virtual currency.
According to Crain’s New York Business, Zaslavskiy’s attorney, Mildred Whalen of the Federal Defenders of New York, had argued to federal Judge Raymond Dearie. She said that Zaslavskiy attempted to refund the duped investors. PayPal subsequently froze his accounts as the ICO payments were likely made with stolen or fraudulent credit cards. When Zaslavskiy told the federal Judge that “at no point, I am a thief,” Dearie replied, “You are a thief. You took something that didn’t belong to you under false pretenses,” adding:
This is a very unusual case for a lot of reasons. It involves new technologies and new currencies. But there is nothing new about lying or flagrant fraud.