US federal judge rules that a pair of allegedly fraudulent ICOs may fall under securities laws, allowing the criminal case to proceed to trial next year
maybe a decade. It's going to be a brutal process, with people going to jail and others being banned from offering securities for life, but the end result will be a functional tokenized ecosystem. http://twitter.com/... Nic Carter / @nic__carter : ICO skeptics are just fudsters right? http://www.bloomberg.com/... Lisa Abramowicz / @lisaabramowicz1 : Securities laws apply to initial coin offerings, according to a new federal court ruling that is believed to be the first of its kind. http://www.bloomberg.com/... @coindesk : ARE ICOs SECURITIES? A federal judge has ruled that a criminal case against an alleged ICO fraudster will proceed to trial, saying existing securities laws apply. http://www.coindesk.com/...
Context & Ripple Effects
This ruling is the judicial sequel to the SEC's opening moves on ICOs. The agency made its first-ever charges against token offerings when it went after Maksim Zaslavskiy's Diamond Reserve Club World and REcoin in an apparent-first fraud action in late 2017, and its new cyber unit followed with the PlexCoin charges months later. Those were administrative enforcement actions; what changes here is that a federal judge has now held, in a criminal case, that these offerings may fall under securities laws at all.
First-order effects
- Zaslavskiy's case proceeds to trial next year as a criminal matter judged under securities-law standards, moving the defendants from regulatory charges to potential jail time and lifetime bans from offering securities.
- The ruling gives the SEC its first judicial confirmation that a court will entertain applying securities law to token sales, validating the enforcement posture it staked out with the 2017 charges.
Second-order effects
- Emboldened by a receptive court, the SEC escalates from one-off fraud cases to targeting large legitimate issuers — within months it files its suit against Kik over the Kin token sale, testing the theory against a mainstream company rather than an alleged scam.
- Token issuers and their lawyers must now price criminal-fraud exposure alongside civil registration risk, shifting ICO structuring toward jurisdictions and formats that avoid US securities-law triggers.
Third-order effects
- If courts keep accepting tokens as securities, US crypto enforcement bifurcates into parallel tracks — securities actions like the eventual summary judgment against Kik and wire-fraud prosecutions of figures like SBF — with the securities question litigated case by case rather than settled by legislation.
The trend: US authorities are converting ICO-era token sales from a regulatory gray zone into a litigated securities regime, with each court ruling expanding the playbook for both civil and criminal enforcement.