The U.S. Securities and Exchange Commission has charged a businessman and two companies for defrauding investors in Initial Coin Offering (ICO) schemes.

The complaint has been filed in federal district court in Brooklyn, N.Y. In its complaint, the SEC alleges that Maksim Zaslavskiy and the companies – REcoin Group Foundation, which claims to offer “Cryptocurrency Backed by Real Estate” and DRC World (also known as Diamond Reserve Club) – have been selling unregistered securities, and the digital tokens being peddled don't really exist.

The SEC obtained an emergency court order to freeze the assets of Zaslavskiy and his companies.

The investors in these companies have been told that they can expect sizeable returns from the companies' operations when neither has any real operations. Zaslavskiy allegedly misstated a number of facts including that he and REcoin raised between $2 million and $4 million from investors when the actual amount is approximately $300,000.

According to the SEC, Zaslavskiy carried his scheme over to DRC World which claimed to invest in diamonds and obtained discounts with product retailers for its investors. The SEC alleges that Zaslavskiy and DRC have not purchased any diamonds nor engaged in any business operations.

The SEC's complaint charges Zaslavskiy, REcoin, and Diamond with violations of the anti-fraud and registration provisions of the federal securities laws. It seems to be first such complaints following the investor alert on ICOs issued by the SEC's Office of Investor Education and Advocacy.

"Investors should be wary of companies touting ICOs as a way to generate outsized returns," said Andrew M. Calamari, Director of the SEC’s New York Regional Office. "As alleged in our complaint, Zaslavskiy lured investors with false promises of sizeable returns from novel technology."

The SEC is seeking permanent injunctions and disgorgement plus interest and penalties. For Zaslavskiy, it also seeks an officer-and-director bar and a bar from participating in any offering of digital securities.

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