US Regulator Alleges Centra Tech Co-Founders with Fraud

Centra Tech raised USD 32 million through an ICO in 2017, promising to build a bridge between commerce and cryptocurrencies

by Coins.Online
03 April • 2.5 min
In Regulation

The US Securities and Exchange Commission (SEC) said on Monday it has charged with fraud the two co-founders of Florida-based Centra Tech, which raised USD 32 million via an initial coin offering (ICO) last year.

The two defendants, Sohrab “Sam” Sharma and Robert Farkas, were arrested by the criminal authorities, SEC said in a statement, published on its website.

Centra Tech offered its CTR token at an ICO in September 2017, promising to create a “world connected to cryptocurrencies”. Its offering presently includes a wallet to store digital assets and a prepaid card to easily spend digital assets. Three other projects are in the pipeline according to its website - a marketplace for digital coin purchases, a cryptocurrency exchange platform, and an open-source hyper speed DPoS Blockchain.

But, according to SEC, Centra’s promise for a debit card backed by Visa and MasterCard that would allow users to instantly convert cryptocurrencies into fiat money is deceitful. The regulator alleges that Centra had no relationships with Visa or MasterCard.

It claims also that Sharma and Farkas created fictional executives with impressive biographies, posted misleading marketing materials, and paid celebrities to advertise the ICO on social media.

"We allege that Centra sold investors on the promise of new digital technologies by using a sophisticated marketing campaign to spin a web of lies about their supposed partnerships with legitimate businesses,” Stephanie Avakian, Co-Director of the SEC's Division of Enforcement, said in the statement.

Shortly before Centra’s ICO in September, international boxing star Floyd Mayweather posted an image on Instagram, endorsing the token project. The post has been removed later.

“Endorsements and glossy marketing materials are no substitute for the SEC’s registration and disclosure requirements as well as diligence by investors,” added Steve Peikin, Co-Director of the SEC's Division of Enforcement.

SEC has been warning against the risks from ICO scams for several months now. On its website, the watchdog cautions that ICOs bear high risk of fraud because the markets for digital assets are low regulated. The agency believes that most ICOs need to be registered with it.

In February, SEC sent a number of subpoenas to firms and individuals behind ICOs, whom it suspected of violating securities laws.

In January, SEC halted an allegedly fraudulent ICO that had raised USD 600 million using former boxing champ Evander Holyfield as a celebrity endorser. Texas-based AriseBank was aiming to gather USD 1 billion from retail investors to fund what it claimed to be the world’s first ever decentralized bank with over 700 cryptocurrencies and ERC-20 compliant tokens.

Investors in the Centra ICO who believe they may be a victim are invited to contact at Report Suspected Securities Fraud or Wrongdoing Form.