In a fast growing investment market, there is bound to be bad actors and abuses. The cryptocurrency market is arguably one of the fastest growing investment vehicles in the world. With that in mind, it should come as no surprise that a federal regulator is taking action against a couple of companies that have allegedly been running a scam on its investors.

News came down this past weekend that the U.S.' Securities Exchange Commission (SEC) has filed fraud charges against both Diamond Reserve Club World (DRC World) and REcoin Group Foundation. Both organizations are owned at least in part by businessman Maksim Zaslavskiy, who is also being charged with the same violations of anti-fraud and registration provisions.

The premise of these alleged scams stands as follows: Zaslavskiy allegedly sold cryptocurrencies that were supposedly backed by real estate assets that might not have ever existed.

This was only one of several misrepresentations he made as put forth in the SEC's filing. Other claims made by the SEC included Zaslavskiy's own claim that REcoin had a "team of lawyers, professionals, brokers, and accountants," who were responsible for guiding the company and its investments. There allegedly is no evidence of anyone helping him manage the funds collected. Also, the company made claims that it had raised as much as $4,000,00 through the sales of its cryptocurrencies when in fact the number is purportedly only $300,000.

As for DRC World, the company was formed and requested investors through a cryptocurrency offering after, according to Zaslavskiy himself in a September 11 bitcoin forum, the government had started interfering with the operations at REcoin. DRC World claimed it would use the proceeds to invest in diamond while the SEC claims it can find no evidence of said operations.

Here's an excerpt from an advertisement related to DRC World's offering:

After all, the diamonds are forever, especially stored in secure locations in the United States and fully insured for their full value. This way they are truly not susceptible to any government manipulations. Members will be able to exchange their tokens for physical diamonds on the Club’s platform in real time and hassle-free.

While neither of these companies would be anywhere near the top of the current list of cryptocurrencies by market cap, this is exactly the kind of news that can make the marketplace a bit skittish.

Along with the charges, the SEC has had all of both company's assets frozen through a court order issued in an emergency hearing at a federal district court in Brooklyn, New York. In addition to a request for all funds to be returned to investors, the SEC will also be asking the court to have Zaslavskiy pay penalties as well as being prohibited from participating in any future digital securities offerings.

The above actions fall in line with the SEC's earlier announcement that it would be providing a lot more scrutiny over the ICO market. Earlier in the week, the SEC said it had created two new units that would be focusing on cybercrimes in an effort to protect prospective investors from false claims.

While a majority of the cryptocurrencies being offered in the marketplace are viable, investors should remain diligent and do the proper amount of research before investing. Everyone should be wary of any claims of enormous returns to be gained from purchasing a new cryptocurrency.