Robert Farkas, the co-founder of a $32 million digital currency scam, faces ten years in prison after pleading guilty to two counts of fraud.
Farkas co-founded Centra Tech in 2017, partnering with Sohrab Sharma and Raymond Trapani, both of whom are also defendants in the lawsuit. The company raised over $32 million in an ICO that lasted nine months, relying on lies, misrepresentations and celebrity endorsements to lure investors.
Farkas has now pleaded guilty to one count of securities fraud conspiracy and one count of wire fraud conspiracy, the Department of Justice has announced. The two counts each carry a maximum sentence of five years in prison.
Centra Tech claimed to be building financial products for the digital currency economy. In order to lure investors, the founders claimed that they had struck a partnership with Bancorp, VISA and Mastercard. This would enable the company to issue the ‘Centra Card’, a VISA or Mastercard debit card that would make it possible to spend digital currencies easily.
Furthermore, they lied about the company’s leadership, the DoJ claims. The three founders led investors to believe that Centra Tech would be led by ‘Michael Edwards’ as CEO. Edwards reportedly had more than two decades worth of experience in the banking industry and a master’s degree from Harvard University. Edwards didn’t exist, however.
Farkas and his co-conspirators also told investors that they had acquired money transmitter licenses in 38 states, also a lie.
They then topped this up by getting celebrities to endorse them, further adding to their perceived credibility. Boxing champion Floyd Mayweather and music producer DJ Khaled took to social media to tout the startup. The SEC pursued the two for failing to disclose that they received compensation from the startup for their endorsement. They settled the suit by paying a fine without admission of wrongdoing.
Craig Stewart, the U.S Attorney in charge of the case, cautioned firms in the digital currency and beyond against using deceit to raise money. He stated, “Whether in the context of traditional equity IPOs or newer cryptocurrency-related ICOs, raising capital through lies and deceit is a crime.”
The 33-year-old Farkas awaits sentencing by U.S. District Judge Lorna G. Schofield.
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