Security & Fraud

Feds Charge Founders Of Mayweather-Endorsed Crypto Firm With Fraud

fraud investigation

The U.S. Securities and Exchange Commission (SEC) has charged two founders of a cryptocurrency company for an allegedly fraudulent initial coin offering (ICO) that raised more than $32 million. Their firm, Centra Tech Inc., had been promoted by boxer Floyd Mayweather in a tweet, CNBC reported.

“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 a statement. “As the complaint alleges, these and other claims were simply false.”

The company’s co-founders, Sohrab “Sam” Sharma and Robert Farkas, were allegedly behind an ICO for CTR Tokens. They claimed the funds would be used for financial products such as debit cards associated with two major card brands that would instantly convert cryptocurrencies into U.S. dollars or other legal tender.

The SEC alleges their company didn’t have a relationship with either brand. The defendants also reportedly created bogus bios for executives who didn’t exist. And they allegedly hired celebrities to promote their ICO on social media platforms.

“As we allege, the defendants relied heavily on celebrity endorsements and social media to market their scheme,” Steven Peikin, co-director of the SEC’s Division of Enforcement, said in the statement. “Endorsements and glossy marketing materials are no substitute for the SEC’s registration and disclosure requirements, as well as diligence by investors.”

The news comes a few months after the SEC began officially warning celebrities that by endorsing ICOs, they could be in violation of the law. At the time, the SEC implied it would consider enforcement action against them.

The agency stated it would “focus on these types of promotions to protect investors and to ensure compliance with the securities laws.” In addition, the SEC put out a separate investor alert at the time, warning investors to be wary of endorsements from prominent people.

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