According to Judge RaymondDearieof the District Court in New York, the ICO’s sales are covered with the U.S securities laws. This new ruling cameduring acase against afallaciousICO promoter Maksim Zaslavskiy who is filed against a fraud case which included investment of more than $300,000 USD from an ICO related scam under the name ‘REcoin’.
Earlier in Sept. 2017, the SEC found Zaslavskiy andtwo of his fellow firms with defrauding investors throughvarietyof ICO scamswhich included‘REcoin’. REcoin was marketed to investors as being backed by real estate and diamond assetsthatin actualrealityfailed toexist anywhere.
In a pioneering ruling, the Judge refused to dismiss the case against Zaslavskiy, whose lawyers earlier pled for dismissal onthe premisethat the ICOs in question were currencies and not securities,insertingthem outside the jurisdiction of the SEC Act.
However, according to the yesterday’s hearing:
“He [Zaslavskiy] argues that the securities lawsareunconstitutionalityimpreciseas applied.The govt., meanwhile, asserts that the investmentscreatedin REcoin and Diamond were investment contracts, andtherefore“securities,” […]and thusthese lawsdon’t seem to beunconstitutionallyimprecise.”
Judge Dearie’s ruling on this matter was thattheICO’s are indeed a security forthe needsof federalcriminal law,thatis what prosecutors have argued since last year.
Dearie has becomethe primaryfirst Judgeto deliver a ruling that places ICOs firmlyat the intervals ofthe jurisdiction of securities regulators, andthis mightprobablyhavevitalimplications for the ICO market bymakinga precedent for future cases.
While the CFTC has had some successes tacklingfallaciouscrypto offeringswithin it pace, the SEC —that has longaforementionedthatit’sjurisdiction over most ICOs — had notnonethelessestablished this authority in court.
An excerpt fromthe last ruling reads as:
“Zaslavskiy’s contrary characterizationsareplainlymeagerto by passrestrictiveand criminalenforcementsof the securities laws.Asthe indictment isdecentbeneaththe Constitutionand therefore also under theFederal Rules of Criminal Procedure,and sincethe lawbeneaththatZaslavskiy is chargedisn’t unconstitutionallyimpreciseas applied, Zaslavskiy’s motion is denied. The casewouldproceed to trial.”
While the ruling comes asa liftfor prosecutors, theit’sby nomeans that they arethe final words on this matter. In his comments, the Judge noted thatthe final decision rests with a jurywhichZaslavskiy’s lawyerswillactually stillpresentthe argument contesting the jurisdiction of securities laws to the jury.