The SEC comes down on 2 cryptocurrency-based fundraising schemes

The Securities and Exchange Commission on Friday charged a man and two companies for operating fraudulent initial coin offerings. 

According to a statement released Friday, the financial watchdog charged Maksim Zaslavskiy and his companies, REcoin Group Foundation and DRC World, with defrauding investors and selling unregistered securities.

"According to the SEC's complaint, investors in REcoin Group Foundation and DRC World (also known as Diamond Reserve Club) have been told they can expect sizeable returns from the companies' operations when neither has any real operations," the agency wrote. 

ICOs allow companies to raise money by issuing their own cryptocurrencies. In some cases companies have raised millions of dollars in a matter of seconds. They've come under scrutiny by regulators because companies have often run an ICO without disclosing substantive information to investors. 

The SEC said Zaslavskiy misled REcoin investors, saying it had a "team of lawyers, professionals, brokers, and accountants" who would handle all investments when no such team existed. 

Similarly, DRC World was a shell, according to the SEC. The company falsely told investors, whom they solicited money from, that they had a inventory of diamonds when they did not. 

The SEC froze the personal assets of Zaslavskiy and his companies after getting an emergency court order, according to the agency.

In July, the US Securities and Exchange Commission announced certain ICO would be subject to regulatory scrutiny. Other countries, such as China and South Korea, have deemed initial coin offerings illegal, because of concerns of fraud.

The market for ICOs has exploded this year with over $2 billion raised, according to data from Autonomous NEXT. 

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