In what may be considered a landmark case within the crypto space, a New York federal judge has ruled that the US securities law applies in the prosecution of cryptocurrency offerings.

US Brooklyn District Judge Raymond Dearie’s ruling paves the way for federal prosecutors to act in court against alleged crypto fraudster Maksim Zaslavskiy. He was arrested in November 2017, accused of swindling funds from unsuspecting investors in two cryptocurrencies, violating the federal Securities Exchange Act.

Zaslavskiy swindled $300,000

According to Reuters, prosecutors claimed that Zaslavskiy raised more than $300,000 from investors in a cryptocurrency called Recoin, which he said was backed by real estate, and diamonds, and supported by another one called Diamond. He lied in both cases, the prosecutors state.

The ruling by Dearie puts to rest arguments in March by the accused’s lawyers asking the judge to dismiss the case saying the two cryptocurrencies were fraudulent and not securities. Therefore, they claimed, the Securities Exchange Act did not apply to this case. The Brooklyn judge rejected the claim saying “the federal securities law must be interpreted flexibly”.

The SEC too views crypto as securities

The judge reminded the defence lawyers that the US Securities and Exchange Commission considers some cryptocurrencies to be securities.

However, also in March, the US Securities and Exchange Commission issued a statement that was viewed by experts as a message that cryptocurrencies were considered securities by the regulatory body. The SEC revealed it was seeking to apply the securities laws to everything crypto related. Jason Gottlieb, a partner at the Morrison Cohen law firm, said: “I think it’s one more message from the SEC that they view coins as securities and they encourage everyone in the space to follow securities laws”.

That same month, another federal judge in Brooklyn ruled that cryptocurrencies could potentially be regulated as commodities by the US Commodity Futures Trading Commission. Congress in the United States has yet to pass crypto related laws.