The battle against fraud in the cryptocurrency space gained a huge boost on Tuesday, as a federal Judge has ruled that Initial Coin Offerings (ICOs) are under the United States securities laws.
Judge Raymond Dearie made this ruling during the court hearing of Maksim Zaslavskiy’s case. Zaslavskiy was charged in February for allegedly being involved in two fraudulent ICOs.
The allegations against the defendant state that he told investors that the tokens had the backings of real estate and diamonds which the prosecutors have denied.
In self-defense, Zaslavskiy stated that the tokens were not securities, putting of a claim that the existing securities laws were “unconstitutionally vague.”
“The fact that on the same floor, in the same court in Brooklyn, New York, the government is saying different things based on which agency is bringing the charge, that brings vagueness,” were the words from Mr. Zalavskiy’s legal team trying to push for the case’s dismissal.
US Securities Laws Aren’t Vague
Judge Raymond refused to dismiss the case on Tuesday, making it clear that the jury was completely in charge of deciding if the ICO in question is a security or not.
“The question is whether the ‘elements of a profit-seeking business venture’ are sufficiently alleged in the indictment, such that, if proven at trial, a reasonable jury could conclude that ‘investors provide[d] the capital and share[d] in the earnings and profits; [and] the promoters manage[d], control[ed] and operate[d] the enterprise.’ For present purposes, we conclude that they are,” the Judge stated.
ICOs Can Be Considered Securities
The Judge went ahead to state that the ICO tokens could be considered as securities.
“Per the indictment, no diamonds or real estate, or any coins, tokens, or currency of any imaginable sort, ever existed — despite promises made to investors to the contrary,” Judge Dearie said in his ruling to buttress his point.
According to him, because an investment opportunity is termed a “virtual currency or “cryptocurrency” doesn’t automatically convert such investment – security – into a currency.
The Judge focused on the Zaslavskiy’s ICOs, not paying much attention to other ICOs. In truth, the verdict of this case would have the most effect on Zaslavskiy, but it may have a ripple effect on other ICOs.Never miss out on our daily crypto news, stories, tips, and price analysis. Join us on Twitter | Telegram | Facebook or subscribe to our weekly Newsletter.