In common law systems, it is precedent that informs judicial approaches

to new and previously unaddressed matters. The precedent that will likely shape the body of U.S. case law on fraudulent initial coin offerings (ICOs) is currently being forged in a federal court in the New York borough of Brooklyn, where a 39-year old entrepreneur, Maksim Zaslavskiy, has pleaded guilty to committing securities fraud. The development that will most likely result in a landmark decision – the jury will gather in April 2019 to decide on a sentence – is yet another twist of a now 14 month-long effort, involving both the U.S. Department of Justice and Securities and Exchange Commission (SEC). Previously, the process has already yielded a fateful ruling by a federal judge who in September established that securities law is applicable to ICO-related cases.

The case that is poised to become so consequential for the whole ICO space deals with two ventures that neither issued a token nor developed any blockchain-powered infrastructure: REcoin and Diamond Reserve Coin both only existed on paper. Yet it also makes perfect sense that the authorities first went after the most brazen instances of ICO fraud, the ones that hurt rookie retail investors the worst and inflicted the most reputational damage on the industry.

When the SEC first filed a complaint against Zaslavskiy in a federal court in September 2017, it was estimated that REcoin and Diamond Reserve Coin ICOs resulted in around 1,000 investors losing some $300,000. Having fallen for Zaslavskiy’s aggressive marketing campaign, these people were led to believe that they either invested in a digital asset that was backed by real estate located in developed countries (REcoin), or purchased a tokenized membership in an elite club for wealthy business people, with physical diamonds in the company’s custody underlying the value of tokens.

In fact, though, they were buying “worthless certificates,” as U.S. district attorney, Richard Donague, put it, on Nov. 15, 2018, Zaslavskiy admitted in his guilty plea: “We had not yet purchased any real estate.” He now faces up to 5 years in prison, pending the decision of a jury panel. The regulator is also filing a civil lawsuit against Zaslavskiy.

The making of a fraudster

To read more on this subject, please click the following link..

https://markethive.com/group/cryptocoin/blog/the-making-of-the-first-us-ico-fraud-case