SEC busts celebrity-backed cryptocurrency scheme for fraud

SEC busts celebrity-backed cryptocurrency scheme for fraud

SEC busts celebrity-backed cryptocurrency scheme for fraud

Sohrab Sharma and Robert Farkas have been charged with fraud for selling "unregistered securities" related to the $32 million they raised from the ICO of their CTR coin between September 19 and October 5.

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.

But Centra Tech had no relationships with Visa or MasterCard, the SEC said. Farkas was reportedly arrested on April 1 as he prepared to board a plane to leave the country.

The SEC alleges that Sharma and Farka mislead investors with lofty promises to develop cutting edge technology through funds raised in the ICO.

Paying Hefty Amounts for Legible Endorsements: Celebrities like Floyd Mayweather Jr. and DJ Khaled were actively promoting the coin in their social media, which created a lot of buzz in the community.

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.

" The charges, filed in NY, also say the pair "claimed that funds raised in the ICO would help build a suite of financial products", such as debit cards that would allow users to instantly convert hard-to-spend cryptocurrencies into legal tender".

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One of those celebrities, who was not named by the SEC, was boxer Floyd Mayweather.

"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.

Mayweather Tweeted out this message to his followers on the launch of the CTR ICO.

"They claimed, for example, to offer a debit card backed by Visa and MasterCard that would allow users to instantly convert hard-to-spend cryptocurrencies into US dollars or other legal tender", the SEC said in a statement.

Then, a month later, Sharma and Trapani stepped down from the company, but Farkas remained.

The SEC is now seeing permanent injunctions, refunds for fraudulent money that was raised and a ban on Sharma and Farkas from participating in securities offerings or serving as officers in a public company. The SEC clarified in March that it is looking to apply securities laws to cryptocurrency exchanges and wallets. Centra was first hit with a class action lawsuit in December.

Neither celebrity is accused in the scheme which the SEC yesterday said raised more than Dollars 32 million from thousands of investors.

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