The Securities and Exchange Commission is going after another company raising money via an initial coin offering, charging Centra Tech, a Miami-based startup, with scamming investors out of $32 million.
According to a report in The Wall Street Journal citing the SEC, co-founders of Centra Tech Sohrab “Sam” Sharma and Robert Farkas marketed the company as a cryptocurrency debit card and ran an ICO in which it sold CTR Tokens, which were unregistered investments. They two allegedly claimed that the proceeds from the ICO would go to build financial products including a debit card that was backed by payment companies Visa and Mastercard that would enable users to convert digital tokens into dollars or other currencies. The SEC, according to the Wall Street Journal, contends the two created fake executives, pretended to have relationships with the credit card companies, posted false and misleading information on its website and paid celebrities to hype the ICO on social media. The Wall Street Journal noted that celebrities including boxer Floyd Mayweather, Jr. and music producer DJ Khaled promoted the ICO. “As we allege, the defendants relied heavily on celebrity endorsements and social media to market their scheme,” Steve Peikin, co-director of the SEC’s Division of Enforcement, said in prepared remarks. “Endorsements and glossy marketing materials are no substitute for the SEC’s registration and disclosure requirements as well as diligence by investors.”
Sharma and Farkas were slapped with charges of violating anti-fraud and registration provisions of securities law. The SEC is seeking permanent injunctions and wants the money scammed returned to victims, plus interest and additional fines and fees. The two are prevented from serving in a public company as an officer or director and from engaging in any offering of securities, noted The Wall Street Journal. “Centra Tech is aware of the allegations and will not be commenting,” an attorney representing the company reported to the WSJ. “Mr. Sharma and Mr. Farkas are represented by personal counsel who will be handling the matters.”