Why the ICO Is Not a Trusted Funding Medium
Maksim Zaslavskiy - who hails from Sheepshead Bay in New York - has been sentenced to a year-and-a-half in federal prison by a Brooklyn-situated court for lying to investors that took part in his token sale. This is being reported as the first cryptocurrency conviction centered around an ICO in the U.S.
Zaslavskiy earned more than $300,000 through the sale and garnered attraction from approximately 1,000 different investors. Sadly, court documents state that he purposely misrepresented his enterprise as a means of making the company appear larger. U.S. Attorney Richard P. Donoghue explained in a statement:
Zaslavskiy committed an old-fashioned fraud camouflaged as cutting-edge technology. This office will continue to investigate and prosecute those who defraud investors, whether involving traditional securities or virtual currency.
ICOs have largely lost their popularity over the past year or so, mainly because they have served to do more harm than good in the cryptocurrency space. While initially believed to be a solid method for garnering startup capital, many companies and individuals have abused the privileges that come with ICOs, and the process has been banned in countries like China.
Many times, people use ICOs as a way of earning money for their businesses. People pledge Ethereum (ETH) or ETH-based tokens in return for a new cryptocurrency that will inherently give them access to the new company’s goods and services. It should be a simple trade of sorts, but it doesn’t always work out that way.
Sometimes, ICOs are fraudulent from the start, where people orchestrating them garner a certain amount and then take off with the funds they’ve earned, as it was never their plan to start a company of any kind.
Otherwise, these ICOs work for a time, but the companies they’re meant to fund ultimately fail within their first six months. The businesses close their doors permanently, but the people who invested in the companies are left with empty pockets, bruised pride and a lot of coins that are now completely useless.
Hence, the risks involved with ICOs have become far too great for some countries to handle.
Don’t Lie About Your Project
Zaslavskiy was initially arrested in October two years ago and was charged with securities fraud and conspiracy to commit securities fraud. The ICO in question was promoted through materials that claimed the cryptocurrency up for sale was backed by several reputed financial companies. This later turned out to be false.
Aside from prison time, Zaslavskiy will also be forced to pay back his investors, though the amount of restitution remains unknown at press time.