Source: https://es.scribd.com/document/374340282/Department-of-Justice
Timestamp: 2019-04-25 03:49:36+00:00

Document:
location, he had not bought any but had “talked” to a “cousin” about them.
the defendant, are the worthless certificates sent to investors that prompted some to ask for refunds.
controlling law. Accordingly, his motion should be denied.
took place between about January 2017 and October 2017.
applicable. Id. at ¶ 3.
internet, in press releases and on REcoin’s website. See Indictment at ¶¶ 11-24.
defendant would later admit, was true.
relies on in his motion.
underlying investments in real estate, as well as the supposed increase in demand for the tokens.
1 at 9; Indictment at ¶ 14.
on its website. Id. at 25.
testimony on September 20, 2017.
of financial transactions mainly focusing on operations with precious stones worldwide.” Id.
promoting Diamond began emerging on about September 7, 2017.
Diamond tokens, as with the REcoin ICO. Indictment at ¶ 19.
allegedly needed to keep investments safe.
enhance its credibility worldwide.” Id. at 21; see also Exhibit 3 (Diamond White Paper), at 3.
[Diamond token], where 100% of the profit is reinvested back into diamonds.” Exhibit 3 at 6.
Diamond…infrastructure… .” Exhibit 3 at 4.
Diamond coins “on external exchanges and make more profit.” Id.
not given any coins or tokens in return. Indictment at ¶ 23; Exhibit 2 at 55.
its face, is enough to call for trial of the charge on the merits.” Costello v. United States, 350 U.S.
implied by the specific allegations made.” United States v. LaSpina, 299 F.3d 165, 177 (2d Cir.
indictment are sufficient to permit the jury to find that the defendant committed securities fraud.
See United States v. Sampson, 371 U.S. 75, 76 (1962); see also United States v. Caronia, 576 F.
1843233 at *1 (S.D.N.Y. Dec. 14, 2000) (same).
of others. See SEC v. Edwards, 540 U.S. 389, 393 (2004); SEC v. W.J. Howey Co., 328 U.S.
and the emphasis should be on economic realit[ies]” underlying a transaction. Tcherepnin v.
that might be sold as an investment. Reves v. Ernst & Young, 494 U.S. 56, 60-61 (1990).
shares in an enterprise existing only in cyberspace.” SEC v. SG Ltd., 265 F.3d 42, 44-59 (1st Cir. 2001).
of whether, under the circumstances” there was an investment contract); Marine Bank, 455 U.S.
LLC, here a purported ICO.
contract exists, the government must first show that the ICO involved an investment of money.
he later tried to convert to the Diamond ICO. Indictment at ¶¶ 12, 20. See SEC v. Shavers, No.
interest that had substantially the characteristics of a security, as discussed in greater detail below.
set forth below, his argument, as applied to the facts in this case, is without merit.
and receive profits on a pro-rata basis. Id.
diamonds in the case of Diamond.
investor’s profits from the REcoin venture depended on the number of tokens they purchased.
unable to resell their tokens in the secondary market in order to profit from their investment.
White Paper specifically stated that REcoin holders were “investors.” See Exhibit 1 at 6.
appreciated the value of the token would appreciate.
argument that the reinvestment of profits cuts against pro-rata distribution simply misses the point.
Ltd., 265 F.3d at 51.
completely worthless, as could the diamonds purchased by the defendant and his co-conspirators.
directly tied to the defendant’s profits.
performance fee equal to 20% of the profits in the investment account).
contract”) (citing 320 U.S. 344, 348 (1943)).
rather than “significant investor control.” Aqua-Sonic Products Corp., 687 F.2d at 582-85.
who would transact on the REcoin and Diamond ecosystem, thereby contributing to its value. Id.
only the allegations in the indictment and not contrary factual assertions); Caronia, 576 F. Supp.
work necessary to establish the ecosystem, including purchasing of the underlying assets.
participate in the scheme, and that the scheme as a whole constituted an investment contract).
diamonds” and creating and developing “the [Diamond] infrastructure.” See Exhibit 3 at 3-4.
tokens they owned would be profitable through the efforts of the defendant and his co-conspirators.
of whiskey to be purchased).
investors’ purported returns. Indictment at ¶¶ 11, 15, 22.
and his co-conspirators, would create and develop the Diamond infrastructure. See Exhibit 3 at 4.
efforts to increase the value of investment).
using their expertise before market forces ever came into play.
investors to provide updates about the efforts he and others were undertaking. Indictment at ¶ 15.
decisions that could affect five percent of the REcoin market value. 14 See Def. Mot. at 17.
Diamond purchasers had no similar voting rights.
essential managerial efforts without which the risk could not pay off.”). See also generally SEC v. Merch.
prospects of a return on their investment” from others’ expertise and management. Id. at 300.
implications, but comes with no support.
statutory construction that remedial legislation should be construed broadly to effectuate its purposes.
The Securities Exchange Act quite clearly falls into the category of remedial legislation.”); Ruefenacht v.
(quoting H.R. Rep. No. 85, 73d Cong., 1st Sess. 11 (1933)).
formalisms, but instead take account of the economics of the transaction under investigation . . .
parties had not stipulated that it constituted a “security”).
the Black’s Law Dictionary for a securities term not defined in an agreement).
in a transaction and recognized as a standard of value.” Id.
are securities rather than the equivalent of currency.”), superseded by 545 F.2d 1388 (4th Cir. 1976).
just an aspiring substitute for cash, like other digital currencies that he now touts in his brief.
argues that this time-tested and flexible law is vague as applied to him.
Dickerson v. Napolitano, 604 F.3d 732, 747 (2d Cir. 2010) (internal quotation marks omitted).
clear standards to eliminate such a risk.” United States v. Farhane, 634 F.3d 127, 139 (2d Cir.
applications of the statute.” Id. at 139-40 (internal quotation marks omitted).
definition of the term ‘security’ in the federal securities laws was void for vagueness”).
class Congress intended to regulate”).
defendant fails the notice prong of the vagueness inquiry.
the fair notice requirement of due process.
“REcoin’s activities are in full compliance and governed by United States law.” Exhibit 1 at 9.
planned to hire an attorney, but instead proceeded with the Diamond ICO.
be ignored, and that he can continue lying to his investors.
something a ‘currency’ or a currency-based product does not mean that it is not a security”).
Def. Mot. at 19, who, he alleges, are harmed by uncertainty of the “nebulous” laws and guidelines.
emphasized the need for flexibility. See, e.g., Howey, 328 U.S. at 299; Grayned, 408 U.S. at 110.
For these reasons, the defendant’s vagueness challenge should be rejected.
of whether the transactions here were investment contracts[.]”).
lack of subject matter jurisdiction and on vagueness grounds should be denied.

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