(Bloomberg) -- A Brooklyn, New York, man accused of peddling cybercurrency offerings backed by non-existent investments in real estate and diamonds claims he can’t be prosecuted for securities fraud. But a judge wasn’t buying that defense.
“There is no blockchain, there is no real estate, there were no diamonds,” U.S. District Judge Raymond Dearie said at a hearing Tuesday. “It was a grand misrepresentation. It just wasn’t there. It’s a gossamer, there’s nothing to it."
The case filed against Maksim Zaslavskiy in November is believed to be the first criminal fraud prosecution focused on an ICO. The Securities and Exchange Commission also sued.
“Cryptocurrencies are in a novel class," his lawyer, Len Kamdang, argued Tuesday. "It’s very difficult to apply securities laws to this asset."
Kamdang noted that another judge in the same courthouse separately concluded that bitcoin was a commodity that can be regulated by the Commodities Futures Trading Commission
Dearie interrupted him.
"Is it possible that it’s both?” the judge asked. “Don’t panic, but we are in a new world here."
Dearie didn’t immediately rule. He said he needs to look at how the allegations against Zaslavskiy stand up to the test set by the U.S. Supreme Court when it ruled that an orange grove business could be found liable for violating securities-fraud laws. The judge also scheduled a trial for Jan. 7.
"It would be nice if the regulators got into the 20th century, much less the 21st," Dearie said. "But I have to deal with the cards that have been dealt to me."
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