Brooklyn Businessman Charged with Fraud in Connection With Two Initial Coin Offerings

A criminal complaint was unsealed today in federal court in Brooklyn charging Maksim Zaslavskiy with securities fraud conspiracy in connection with engaging in illegal unregistered securities offerings and fraudulent conduct and misstatements designed to deceive investors as part of two Initial Coin Offerings (ICOs).  Zaslavskiy conducted these ICOs through two of his companies, REcoin Group Foundation, LLC (REcoin) and DRC World, Inc., which was also known as Diamond Reserve Club (Diamond).  Zaslavskiy marketed RECoin as “The First Ever Cryptocurrency Backed by Real Estate,” and subsequently touted Diamond as an “exclusive and tokenized membership pool” that was hedged by physical diamonds.  The defendant was arrested this morning and his initial appearance is scheduled for this afternoon before United States Magistrate Judge Ramon E. Reyes, Jr.  In a separate action, the United States Securities and Exchange Commission (SEC) filed civil charges against Zaslavskiy.

Bridget M. Rohde, Acting United States Attorney for the Eastern District of New York and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), announced the charges.

 “As alleged, Zaslavskiy and his associates enticed investors by promising returns using novel ICOs even though Zaslavskiy knew that no real estate or diamonds were actually backing the investments,” stated Acting United States Attorney Rohde.  “This Office and our partners at the FBI are committed to protecting investors and ensuring that the securities markets are free from manipulation.”  Ms. Rohde extended her grateful appreciation to the Securities and Exchange Commission, New York Regional Office, for their assistance in this case.

“As alleged, Zaslavskiy and associates led their victims to believe they were hedging their bets on cryptocurrency secured by real estate and diamond investments,” stated Assistant Director-in-Charge Sweeney. “Much like a diamond, however, their promises were flawed, and the investments didn't exist. Today’s charges are a reminder that we intend to prosecute those who exploit our markets by engaging in corrupt behavior.”

In connection with the two ICOs, Zaslavskiy, with the help of others working with him, allegedly sold virtual tokens or coins to investors under the pretense that the coins were backed by investments in real estate and diamonds, even though no such investments existed.  Virtual currency, such as that promoted in these ICOs, is a digital representation of value that can be digitally traded but does not have legal tender status, and functions only by agreement with the community of users of that particular currency.  Zaslavskiy and his cohorts promised substantial returns to investors even though neither company had any real operations.  With respect to REcoin, Zaslavskiy advertised that the company had a “team of lawyers, professionals, brokers and accountants” who would invest the proceeds from the REcoin ICO into real estate when in fact no such employees had ever been hired or even consulted, and no real estate investments were made.  Similarly, Zaslavskiy told prospective investors in Diamond that their investment in Diamond tokens was “hedged by physical diamonds,” even though Diamond had not actually purchased any diamonds or engaged in any business operations.

If convicted, the defendant faces up to five years’ imprisonment and a fine. The charges in the complaint are merely allegations, and the defendant is presumed innocent unless and until proven guilty.   

The government’s case is being handled by the Office’s Business and Securities Fraud Section.  Assistant United States Attorney Julia Nestor is in charge of the prosecution.

The Defendant:

MAKSIM ZASLAVSKIY
Residence: Brooklyn, New York
Age: 38

E.D.N.Y. Docket No. 17-MJ-934