For the first time, a US federal court has ruled that in appropriate circumstances cryptocurrencies can be subject to the provisions of US securities laws. In U.S. v. Zaslavskiy, No. 1:17-cr-00647, slip op., 2018 WL 4346339 (E.D.N.Y. Sept. 11, 2018), Judge Raymond Dearie of the Eastern District of New York upheld a criminal indictment for securities fraud involving the sales of cryptocurrency tokens in an Initial Coin Offering (ICO). Combined with another first-ever ruling earlier this year in Commodity Futures Trading Commission v. McDonnell, 287 F. Supp. 3d 213 (E.D.N.Y. 2018), that fraudulent ICOs can in proper circumstances be subject to enforcement proceedings under the antifraud provisions of the Commodities Exchange Act, the federal government has now established a significant beachhead in using federal financial regulatory tools to police activity in the cryptocurrency space.

Robert A. Schwinger, a partner in the Norton Rose Fulbright New York Office, has written a Legal Update, available here, providing an in-depth analysis of this important case.