The ruling came in a case against a fraudulent ICO promoter Maksim Zaslavskiy, whom prosecutors are looking to bring up on fraud charges for defrauding investors of more than $300,000 from a scam ICO called REcoin.
A U.S. District Judge in Brooklyn has delivered a landmark judgment with far-reaching implications for the initial coin offering (ICO) market. Judge Raymond Dearie of the U.S. District Court Eastern District of New York today ruled that U.S. securities laws cover ICO token sales.
REcoin is the biggest scam it was reported that the SEC charged Zaslavskiy and two of his companies with defrauding investors through a number of ICO scams including REcoin. REcoin was marketed to investors as being backed by real estate and diamond assets which in actual fact did not exist.
In a pioneering ruling, Judge Dearie refused to dismiss the case against Zaslavskiy, whose lawyers earlier pled for dismissal on the basis that the ICOs in question were currencies and not securities, placing them outside the jurisdiction of the SEC Act.
An excerpt from today’s hearing file reads:
“He [Zaslavskiy] argues that the securities laws are unconstitutionality vague as applied. The Government, meanwhile, asserts that the investments made in REcoin and Diamond were “investment contracts,” and thus “securities,” […] and that these laws are not unconstitutionally vague.”
Judge Dearie’s ruling on this matter was that an ICO is indeed a security for the purposes of federal criminal law, which is what prosecutors have argued since the last year.