At a time in Crypto history, Initial Coin Offering was the preferred way for companies to raise funds for their various projects and it seemed that a new one sprung up every day. While that was a time of great growth for crypto and blockchain-related firms, it was also a bit of a wild west as ICO laws were not greatly defined in the initial stages as a result, many of the ICOs that were launched within the market were either unregistered, did not follow the protocol or were downright fraudulent. Even though ICOs are not quite as popular as they used to be, various regulatory bodies are still trying to sort through the chaos of that time.
According to reports from November 18, 2019, Maksim Zaslavskiy, a computer programmer from Brooklyn, has been sentenced to 18 months in prison for the running of two fraudulent ICOs.
Cryptos and Crime
With this sentencing, the Brooklyn businessman has become the first person in the United States to be convicted of running a fraudulent Initial Coin Offering. He had run the fraudulent ICOs and advertised to investors that it was backed up by diamonds and real estate but they did not exist and he pled guilty to conspiracy to commit securities fraud in November 2018.
He had convinced investors that the ICO was run by real estate professionals and was backed by United States property investments. By doing this, he was able to convince over a thousand investors to invest at least 300,000 into his scam.
“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,” said Richard P. Donoghue, a U.S. attorney for the Eastern District of New York.
During the trial, Mildred Whalen of the Federal Defenders of New York, who was the defense attorney, argued to the judge that Zaslavskiy tried to return the funds but that his money was frozen by PayPal under suspicion that the ICO payments were made with stolen credit cards. However, the judge did not agree with this defense.