A Brooklyn federal court judge has issued what could become a defining decision for cryptocurrencies, declaring that SEC rules apply to initial bitcoin offerings.
Judge Raymond Dearie’s ruling came as he declined to toss the federal charges against accused fraudster Maksim Zaslavskiy, whose lawyers had tried to argue that current laws around crypto are “unconstitutionally vague” and so didn’t fall under federal securities law.
Dearie disagreed, saying a jury would be able to assess alleged crypto theft under existing laws.
“Though ‘investment contract’ has not been defined by Congress, the test for whether a “given financial instrument or transaction constitutes an ‘investment contract’ under the federal securities laws,” has long been settled,” Dearie wrote.
Zaslavskiy is accused of scamming more than $300,000 from investors, as he claimed to be raising funds for two ventures that would allow lenders to buy diamonds or real estate through digital currencies he dubbed REcoin and Diamond Reserve Coin.
While Dearie didn’t go so far as to define REcoin and Diamond as securities, he said Zaslavskiy’s reading of the law surrendering crypto “overly narrow.”
The Brooklyn man — whose brother Dmitry is an executive at Morgan Stanley — has pleaded “not guilty” to charges of securities fraud conspiracy and securities fraud.
He faces up to 20 years behind bars if convicted.