Diamond Reserve Club False Claims

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Diamond Reserve Club

The Diamond Reserve Club was an organization which planned to offer tokens that were backed by diamonds and real estate to members. However, in actuality, there wasn't any backing yet. $75k worth of funds were raised before the SEC got involved and attempted to shut down the operation. They were able to return $26k as that was all of the participants they could identify.

This exchange or platform is based in United States, or the incident targeted people primarily in United States.

About Diamond Reserve Club

"The Diamond Reserve Club is a closed private tokenized membership club. The information about ownership and transfer of membership tokens is stored on the member’s blockchain, which is a distributed among all members of the Club database."

"The DRC is a Business Club which is founded and self-financed by the humanitarian, philanthropist, and entrepreneur Max Zaslavskiy is the answer to the question of exclusivity in the ever-widening tokenized membership pool. It only took a few years for the world to go mad for crypto and it’s time to refine the offer in such a way that will separate toy-tokens from digital entities that provide DRC members with the real right of access to the most modern, most timely, most useful benefits."

"The basis for the Diamond Reserve Club tokenized membership is the ownership of Diamond Reserve Coin (DRC), which is hedged by physical diamonds. The DRC will allow investors to convert their currency and savings into stable inflation-proof digital entity. By acquiring at least 1 DRC you will claim the membership in the exclusive Diamond Reserve Club (DRC) with privileges such as access to the blockchain transactional databases. The more tokens you own, the greater access you will have to the exclusive offerings of our partners."

"As you keep climbing the token ladder, you'll get access to the rest of the DRC ecosystem, unlock all platforms and gain access to exclusive listings, and be able to take full advantage of such highly sought-after digital products as smart contracts, and pay for them with your newly acquired autonomous digital financial instrument - the Diamond Reserve Coin. All in complete and utter anonymity."

"DRC is powered by blockchain technology offering stability and a superior alternative to storing savings in the form of a primary currency. It is hedged by physical diamonds which are stored in secure locations in the United States and are fully insured for their full value."

"DRC is not susceptible to government or central bank manipulation. Confidence in digital assets and their popularity has grown tremendously in the past decade since Bitcoin was first launched in 2009."

"The initial sale of 10,000,000 DRCs will be at a 15% discount, with 1 Diamond Reserve Coin (DRC) equaling $0.85 USD. This discount will become progressively lower as more DRCs are sold."

"83% of the annual issue of tokens is intended for securing tokens in the form of a diamond investment. In a negative scenario, DRC will offer an exchange of up to 70% of the DRC token market value for the Club’s assets of comparable value as an alternative to the current liquidity."

"Investors in Zaslavskiy’s company’s REcoin Group Foundation and DRC World (also referred to as Diamond Reserve Club) were told that they could expect significant returns on their investments while both companies were not actually in operation, according to the SEC’s complaint."

"By Complaint dated September 29, 2017, the SEC filed an emergency civil action in the United States District Court for the Eastern District of New York against defendants, REcoin Group Foundation LLC (“REcoin”), DRC World Inc., a/k/a Diamond Reserve Club (“Diamond”), and Maksim Zaslavskiy (“MZ”). The SEC sought temporary and permanent injunctions to stop the defendants alleged activity,"

“ … from engaging in illegal unregistered securities offerings and ongoing fraudulent conduct and misstatements designed to deceive investors in connection with the sale of securities in so-called “Initial Coin Offerings” (“ICOs”).”

"Pursuant to Section 20 of the Securities Act [15 U.S.C. § 77t(b)] and Sections 2l(d)(l) & (d)(5) of the Exchange Act [15 U.S.C. § 78u(d)(l) &(d)(5)], the SEC alleged that in just two months MZ, who was the President and sole owner of REcoin and Diamond, had raised at least $300,000.00 from investors through various material misrepresentations and deceptive acts relating to supposed investments in digital “tokens” or “coins” offered by REcoin and Diamond during the ICOs. Each ICO was to be backed by real estate investments via REcoin, and diamonds via Diamond. Investors in the REcoin ICO would receive returns from the real estate investments, and 10-15% returns for those investing in the Diamond ICO."

"The SEC further alleged that the tokens or coins were offerings for securities without a registration statement or exemption. However, in reality neither the coins, the real estate investments nor the diamonds ever existed and those investors that transferred funds received nothing from the ICOs."

"On July 15, 2018, the defendant Maksim Zaslavskiy pleaded guilty pursuant to a plea agreement to Count Two of a four-count Superseding Indictment, charging the defendant with conspiracy to use and employ one or more manipulative and deceptive devices and contrivances in furtherance of a scheme to defraud. The defendant was sentenced on November 18, 2019 to 18 months’ imprisonment and three years’ supervised release. No forfeiture was sought by the government or imposed by the Court. At the time of sentencing, the government, with the defendant’s consent, sought additional time to make a restitution submission to the Court, and since then the Court has granted several requests for adjournment."

"The government has not received affidavits of loss for many of the cryptocurrency investors, and, as a result, has been unable to identity most investors who have not submitted affidavits to date."

"In the document submitted at the Court on August 14, 2020, the government estimates the loss to victims, who to date have not been paid back as a result of the Recoin and Diamond fraud scheme to be $75,203.77. This amount consists of payments made by investors into the fraudulent scheme through the Amazon wallet and through cryptocurrency payment processors (Coinpayments and Coinbase)." "However, because the government has been unable to determine the identities of many of the individuals who invested through Coinpayments, the government requests that the Court amend the Judgement, entered on November 20, 2019, to order that the defendant pay restitution in the amount of $26,543.49 to the victims readily identifiable by the government."

This exchange or platform is based in United States, or the incident targeted people primarily in United States.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

• Known history of when and how the service was started.
• What problems does the company or service claim to solve?
• What marketing materials were used by the firm or business?
• Audits performed, and excerpts that may have been included.
• Business registration documents shown (fake or legitimate).
• How were people recruited to participate?
• Public warnings and announcements prior to the event.

Don't Include:

• Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
• Anything that wasn't reasonably knowable at the time of the event.

There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

The Reality

This sections is included if a case involved deception or information that was unknown at the time. Examples include:

• When the service was actually started (if different than the "official story").
• Who actually ran a service and their own personal history.
• How the service was structured behind the scenes. (For example, there was no "trading bot".)
• Details of what audits reported and how vulnerabilities were missed during auditing.

What Happened

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - Diamond Reserve Club False Claims

Date	Event	Description
September 29th, 2017	Main Event	Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.

Technical Details

This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?

Total Amount Lost

The total amount lost has been estimated at $75,000 USD.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

Total Amount Recovered

The total amount recovered has been estimated at $26,000 USD.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

General Prevention Policies

It's unclear whether there was an intentional scam in this case. With better structuring, such a system could be set up as a DAO, and many risks could be avoided.

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.