A new ruling by a federal judge in New York has put Initial Coin Offerings under the umbrella of securities law. The decision made by the U.S. District Judge Raymond Dearie of the U.S. District Court Eastern District of New York could have heavy implications on the future of digital tokens.
This decision, the first of its kind, grants the SEC the go-ahead to pursue criminal cases against ICO organizers under current US securities laws.
Raymond ruled that two ICOs conducted by Brooklyn resident Maksim Zaslavskiy would be classified as security sales for the purposes to bring the prosecution under federal criminal laws. According to Raymond, “Simply labeling an investment opportunity as a ‘virtual currency’ or ‘cryptocurrency’ does not transform an investment contract a security into a currency.”
As previously reported, Zaslavskiy has been accused of committing securities fraud for selling tokens which represented shares in a real estate venture and a separate diamond business. However, prosecutors claim that neither of these ventures actually bought the assets customers were investing in.
Zaslavskiy’s lawyers argued that “securities laws are unconstitutionally vague as applied” to the indictment against the defendant.
Dearie has become the first judge to deliver a ruling that places ICOs firmly within the jurisdiction of securities regulators, and this could potentially have important implications for the ICO market by creating a precedent for future cases.