SEC shuts down Mayweather-backed ICO over fraud charges
Startup Centra Tech is on its death bed after the U.S. Securities and Exchange Commission (SEC) charged its two founders with orchestrating a fraudulent initial coin offering (ICO). Sohrab Sharma and Robert Farkas, the co-founders of Centra Tech, were charged with selling unregistered securities to thousands of investors, raising more than $32 million in the process.
The securities regulator said Sharma and Farkas offered and sold unregistered investments through a “CTR token,” telling would-be investors that the funds raised in the token crowd sale would go towards building “a suite of financial products.” For instance, they claimed to create a Master Card- and Visa-backed debit card, allowing users to instantly convert hard-to-spend cryptocurrencies into U.S. dollars or other available legal tenders. The truth, however, is that the ICO isn’t connected with the payment processing giants.
To promote the ICO, Centra Tech created fictional executives with very appealing biographies and also posted misleading marketing materials on its website. The ICO depended heavily on celebrities and social media to market their scheme. Boxing champion Floyd Mayweather Jr. was one of the celebrities who were heavily paid to promote the ICO. He also endorsed Centra Tech in September, although his Instagram post has since been removed.
“Endorsements and glossy marketing materials are no substitute for the SEC’s registration and disclosure requirements as well as diligence by investors,” said Steve Peikin, co-director of the SEC’s Division of Enforcement.
According to the SEC, Farkas made a flight reservation to leave the U.S. but was arrested before he could board his flight. Sharma was later arrested by law enforcement officers.
Sharma and Farkas were charged in New York with violating the anti-fraud and registration provisions of the federal securities laws. The complaint seeks permanent injunctions, return of allegedly ill-gotten gains plus interest and penalties, as well as bars the two from serving as public company officers or directors and from participating in any offering of digital or other securities.
Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as SegWitCoin BTC coins. Altcoins, which value privacy, anonymity, and distance from government intervention, are referenced as dark coins.
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