The Security and Exchange Commission today has charged both a diamond and a real estate initial coin offering scheme with defrauding investors.
REcoin, which promoted itself as the first cryptocurrency-backed real estate company and DRC World, a diamond company, are owned by businessman Maksim Zaslavskiy. The SEC accuses Zaslavskiy of selling unregistered securities and coins that don't exist to unsuspecting investors, according to a statement from the SEC.
Zaslavskiy allegedly told these investors they could expect "sizeable returns" from each operation, all the while misstating how their money would be invested and misrepresenting how much had already been invested, according to the SEC.
The U.S. government has since obtained an emergency court order to freeze Zaslavskiy's and his companies assets.
Though these appear to be the first initial coin offerings, or ICO's, to come under fire for fraud, they certainly won't be the last. The SEC has even recently warned the public about ICO's by issuing an investor alert in July, telling potential investors to be wary of unsolicited offers and unbelievable claims such as high returns.
"Investors should be wary of companies touting ICOs as a way to generate outsized returns," SEC spokesperson Andrew M. Calamari said in the statement out today. "As alleged in our complaint, Zaslavskiy lured investors with false promises of sizeable returns from novel technology."