Sunday, October 1, 2017

This looks familiar: SEC shuts down two ICOs (RECoin and DRC) for bogosity

Two days ago (September 29th, 2017) SEC shut down two companies ran by Maksim Zaslavskiy trying to promote ICOs, or initial coin offerings. Zaslavskiy claimed his cryptocurrencies are backed by Real Estate (REcoin) and Diamonds (DRC - Diamond Reserve Club/Coin). Turns out they are just bogus claims.

For those who track this sort of things, this is a virtually beat-for-beat clone of an earlier scam, Gemcoin, "backed by amber", shut down by SEC back in 2015.

Gemcoin was a fictional cryptocurrency released by USFIA based in Arcadia, California. Its head is Steve Chen (also known as Chen Li 陳力).  Chen ran 13 different entities that dabbled in MLM telecom, real estate, jewelry and gemstones, art imports, and so on, and also encouraged recruitment from inside China. In 2014, his latest scheme, American Mining 美洲礦業 collapsed in China leading to multiple arrests. American Mining also promised massive profits by investments in amber.

Steve Chen's final scheme, Gemcoin, is aimed at overseas Chinese ex-pats. It is supposedly a cryptocurrency like Bitcoin but backed by amber. It also claimed amber is very valuable and USFIA has exclusive mining rights and jewelry factory in the Dominican Republic. It had the backing of several local celebrities, including former mayor of Arcadia John Wuo. Steve Chen and his second, Leonard Johnson, ran investment seminars in multiple Chinatowns across North America, sometimes even dressing up his security guard, John Zhang, as a "jewelry appraiser".

When SEC finally shut down USFIA/Gemcoin in 2015, the scheme had taken in over 30 million dollars. John Wuo, who had endorsed Gemcoin, quickly resigned as city councilman "due to health reasons".  And the truth started coming out... The receiver who took over the company said there are no gem grade amber in storage, just regular 'souvenir' grade stuff. And the alleged contract for the mine doesn't exist either. It was all one huge hoax scam. 

When you go through the history of REcoin and DRC, you will find a familiar albeit accelerated pattern.

REcoin was launched in July 2017 but did not actually go live until August 7, 2017. It claimed it gathered US$1.5 million in token purchases. Zaslavskiy was so happy, he quickly launched the successor, Diamond Reserve Club and DRCoin.

But it was all a lie. SEC shut down the whole thing, revealing that Zaslavsky only got about 300K, inflating his revenue 5X to sound impressive. All the alleged "charitable donations" go back to Zaslavskiy himself as he runs all the foundations too. All his companies are actually PO Boxes and Virtual Offices.

It also suggested that the launch of DRC was an attempt to divert attention as there were announcements that any REcoins will be automatically converted to DRC, suggesting there were no real estate backing anything. It's also amusing how much technobabble this guy can produce on bitcointalk.

But the similarity is clear: empty promises of profit, backed by something (you can't see) and a bunch of high-falutin.

Don't fall for bogus promises of money, no matter how fancy it sounds.

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