A New York federal judge has ruled that securities laws in the United States can be applied for prosecuting cryptocurrencies fraud allegations.
This was reported on by Reuters.
U.S. District Judge Raymond Dearie said that the case against Brooklyn resident Maksim Zaslavskiy, which claimed that he defrauded investors in two cryptocurrencies supposedly backed by real estate and diamonds, could proceed.
Dearie ruled that federal securities laws should be taken “flexibly,” sacking a motion from Zaslavskiy’s lawyers to drop the charges on the grounds that the cryptocurrencies didn’t fall under the Securities Exchange Act.
Dearie wrote in a statement:
“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.”
According to the report, Dearie’s statement and other filings in Zaslavskiy’s case did not cite any identical court decisions on implementing federal securities law to crypto-related fraud cases.
Prosecutors have asserted that in 2017, Zaslavskiy gained at least $300,000 from investors for a cryptocurrency called REcoin, which maintained that it was supported by real estate, and Diamond, “backed” by diamonds. Prosecutors claimed that no real estate or diamonds supported the digital assets.
Dearie stressed that it would be up to the jury to make a final ruling, adding that Zaslavskiy’s lawyers would be able to make their case in court that the said tokens should be considered currencies, making securities laws not applicable.
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