Back in July, a company called REcoin Group launched REcoin, which it billed as the “first ever cryptocurrency backed by real estate.”

Details published by the company stated that REcoin was a “new, proprietary cryptocurrency designed for a broad range of financial transactions” that was backed by “real estate held by 101REcoin Trust in countries with a developed and stable economy such as the U.S., Canada, Japan, Great Britain and Switzerland.”

But, according to the Securities and Exchange Commission, REcoin and its initial coin offering were a fraud designed to bilk unwitting investors.

A cryptocurrency is a “digital or virtual currency that uses cryptography for security,” the most famous of which is Bitcoin. An initial coin offering is the first offering of a digital currency.

The SEC announced late last week that it charged REcoin and the company’s founder, Maksim Zaslavskiy, with defrauding investors by selling unregistered securities and selling digital tokens or coins that don’t actually exist.

According to the SEC, Zaslavskiy is allegedly behind a pair of fraudulent ICOs supposedly backed by real estate and diamonds.

The SEC’s complaint states that investors in REcoin Group and DRC World (also known as Diamond Reserve Club) were told that they can expect “sizeable returns” from the companies’ operations, despite the fact that neither company had any real operations.

As seen in this press release, REcoin touted that an “international team of attorneys and programmers have been working tirelessly on creating solutions for REcoin holders to allow them to enter smart contracts in real estate rent.”

REcoin’s marketing materials also stated that the company’s use of lawyers, programmers, etc. “would inevitably lead to the exponential increase of the REcoin’s investment potential.”

But, the SEC states that no lawyers, professionals, brokers, or accountants were hired or even consulted in the supposed launch of REcoin.

Additionally, the company said that after it launched, it planned to run several “partner platforms” for investors, including: an online platform for auctions for the sale/lease of real estate; a service for finding/offering real estate services; a news site dedicated to real estate; a classified ads platform designed specifically for Realtors; and an online platform for crowdfunding in real estate.

The SEC also claims that Zaslavskiy and REcoin allegedly misrepresented that the company raised between $2 million and $4 million from investors, when the actual amount is closer to $300,000.

The SEC claims that Zaslavskiy used a similar scheme for the Diamond Reserve Club, which supposedly invests in diamonds and obtains discounts with product retailers for individuals who purchase “memberships” in the company. 

According to the SEC, Zaslavskiy and Diamond Reserve Club allegedly lied to investors and did not purchase any diamonds or engage in any business operations.

The SEC’s complaint, filed last week in federal court in New York, charges Zaslavskiy, REcoin, and the diamond company with violations of the anti-fraud and registration provisions of the federal securities laws.

The complaint also seeks permanent injunctions and disgorgement plus interest and penalties. As for Zaslavskiy, the SEC is seeking an officer-and-director bar and a bar from participating in any offering of digital securities.

The SEC also obtained an emergency court order to freeze the assets of Zaslavskiy and his companies.

“Investors should be wary of companies touting ICOs as a way to generate outsized returns,” said Andrew Calamari, director of the SEC’s New York Regional Office. “As alleged in our complaint, Zaslavskiy lured investors with false promises of sizeable returns from novel technology.”