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New York man charged with conspiracy to defraud investors

NEW YORK (Reuters) - A Brooklyn man was arrested Wednesday on charges that he conspired to defraud buyers of two new cryptocurrencies, falsely telling them that the currency was backed by diamonds and real estate, U.S. prosecutors said in a statement.

Maksim Zaslavskiy, 38, was accused in a criminal complaint of deceiving investors in two separate initial offerings of cryptocurrencies. He faces up to five years in prison if convicted, according to prosecutors.

Zaslavskiy was released on a $250,000 bond after appearing in Brooklyn federal court Wednesday afternoon, according to John Marzulli, a spokesman for federal prosecutors in Brooklyn.

His court-appointed lawyer, Mildred Whalen, declined to comment on the charges.

Cryptocurrencies, like the well-known Bitcoin, are digital assets that are meant to be treated as currency by their users, though they are not legal tender. So-called “initial coin offerings,” soliciting investments in new cryptocurrencies, have become more common, raising more than $2 billion this year so far.

Prosecutors said Zaslavskiy raised at least $300,000 from investors in a cryptocurrency called REcoin, which he claimed was backed by real estate, and another cryptocurrency called Diamond, which he said was backed by diamonds, over the course of several months earlier this year.

They said he conducted the offerings through two companies, REcoin Group Foundation LLC and DRC World Inc, respectively.

In fact, prosecutors said, no real estate or diamonds backed the virtual currencies.

The U.S. Securities and Exchange Commission, which has said that cryptocurrencies may be regulated as securities, is also pursuing a civil case against Zaslavskiy, authorities said.

Reporting By Brendan Pierson in New York; editing by Diane Craft