According to Judge Raymond Dearie of the District Court in New York, the ICO’s sales are covered with the U.S securities laws. This new ruling came during a case against a fallacious ICO 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 and two of his fellow firms with defrauding investors through variety of ICO scams which included ‘REcoin’. REcoin was marketed to investors as being backed by real estate and diamond assets that in actual reality failed to exist anywhere.
In a pioneering ruling, the Judge refused to dismiss the case against Zaslavskiy, whose lawyers earlier pled for dismissal on the premise that the ICOs in question were currencies and not securities, inserting them outside the jurisdiction of the SEC Act.
However, according to the yesterday’s hearing:
“He [Zaslavskiy] argues that the securities laws are unconstitutionality imprecise as applied. The govt., meanwhile, asserts that the investments created in REcoin and Diamond were investment contracts, and therefore “securities,” […] and thus these laws don’t seem to be unconstitutionally imprecise.”
Judge Dearie’s ruling on this matter was that the ICO’s are indeed a security for the needs of federal criminal law, that is what prosecutors have argued since last year.
Dearie has become the primary first Judge to deliver a ruling that places ICOs firmly at the intervals of the jurisdiction of securities regulators, and this might probably have vital implications for the ICO market by making a precedent for future cases.
While the CFTC has had some successes tackling fallacious crypto offerings within it pace, the SEC — that has long aforementioned that it’s jurisdiction over most ICOs — had not nonetheless established this authority in court.
An excerpt from the last ruling reads as:
“Zaslavskiy’s contrary characterizations are plainly meager to by pass restrictive and criminal enforcements of the securities laws. As the indictment is decent beneath the Constitution and therefore also under the Federal Rules of Criminal Procedure, and since the law beneath that Zaslavskiy is charged isn’t unconstitutionally imprecise as applied, Zaslavskiy’s motion is denied. The case would proceed to trial.”
While the ruling comes as a lift for prosecutors, the it’s by no means that they are the final words on this matter. In his comments, the Judge noted that the final decision rests with a jury which Zaslavskiy’s lawyers will actually still present the argument contesting the jurisdiction of securities laws to the jury.