Centra Tech Co-founders Arrested For Fraudulent ICO
Thousands of investors were duped by a dodgy initial coin offering (ICO) by Sohrab “Sam” Sharma and Robert Farkas, co-founders of a business called Centra Tech, announced the US Securities and Exchange Commission (SEC) on April 2, 2018. The ICO was promoted by celebrities such as Floyd Mayweather and DJ Khaled.
Both Sharma and Farkas now face criminal charges in Manhattan federal court on multiple counts including securities fraud, conspiracy to commit securities fraud, wire fraud, and conspiracy to commit wire fraud. Farkas was reportedly arrested on April 1 as he prepared to board a plane to leave the country.
What was Centra Tech up to?
According to the SEC, Centra raised a whopping $32 million in 2017 by way of an ICO, which is basically a method of fundraising wherein companies sell custom digital currencies in exchange for bitcoin or fiat currencies such as the US dollar.
The company claimed that its digital currency would give investors access to a forthcoming crypto exchange, as well as a digital currency debit card affiliated with the MasterCard and Visa networks. However, the charges brought against the company explicitly states that Centra never had any tie-up with either of these two companies.
The SEC’s press release read:
“The SEC’s complaint alleges that Sohrab “Sam” Sharma and Robert Farkas, co-founders of Centra Tech. Inc., masterminded a fraudulent ICO in which Centra offered and sold unregistered investments through a “CTR Token.” Sharma and Farkas allegedly claimed that funds raised in the ICO would help build a suite of financial products.”
The complaint further states that Sharma and Farkas “engaged in an illegal unregistered securities offering and, in connection with the offering, engaged in fraudulent conduct and made material misstatements and omissions designed to deceive investors in connection with the offer and sale of securities in the Centra I.C.O.”
Celebrity and Social Media-driven Campaigns
Over the past few months, regulators in the US have made it abundantly clear that ICOs are going to remain on their watchlist hoping that it would serve as a deterrence against otherwise rampant fraudulent activities.
Apparently, Centra Tech made a name for itself in the online space by exaggerating their reach in the corporate world. Sharma and Farkas allegedly persuaded investors to purchase their tokens by lying about Centra’s non-existent partnership with MasterCard, Visa, and the Bancorp.
Additionally, the duo carried out an aggressive social media campaign featuring celebrities such as undefeated boxing champion Floyd Mayweather and DJ Khaled. Unbeknownst to the scam that was cooking under the disguise of a legit business, Mayweather, who has eight million followers on Twitter, endorsed Centra Tech’s ICO on the microblogging network.
“Centra’s (CTR) ICO starts in a few hours. Get yours before they sell out, I got mine.” Mayweather tweeted.
However, it doesn’t look like US agencies are going to charge the celebrity boxer with any wrongdoing.
Following the SEC’s crackdown on Centra Tech, leading crypto exchange Binance has issued a warning asking investors to exercise caution while dealing with the CTR token.
Binance stated that the exchange is monitoring the situation and may take further action “including delisting” as and when more information comes out. It also said that a notice period of 72 hours or more would be served to its customers if CTR is delisted from the exchange.
Even in the face of legal action, Centra’s tokens are still trading with a market capitalization of $6.86 million and 24-hour volume of $42.5 million. The token has decreased almost 70 percent in value over the past 24 hours, priced at $0.10 at the time of writing.
With many of the token’s supporters refusing to take the news seriously, it seems that many of Centra’s investors will have a bitter pill to swallow in the upcoming days.