News » Crime » Centra Tech. co-founders arrested for $32-million fraud

Centra Tech. co-founders arrested for $32-million fraud

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They ran the scheme from July 30, 2017, through October 5, 2017.

The Securities and Exchange Commission (SEC) has charged Indian American Sohrab “Sam” Sharma and Robert Farkas, co-founders of Centra Tech., Inc., a financial services start-up for orchestrating a fraudulent initial coin offering (ICO) that raised more than $32 million from thousands of investors last year.

The criminal authorities have separately charged and arrested both defendants.

According to SEC’s complaint, the defendants raised at least $32 million from thousands of investors through the sale of unregistered securities issued by Centra Tech., Inc. The securities were issued in a fraudulent ICO. The term is meant to describe the offer and sale of digital assets issued and distributed on a blockchain.

The duo sold the Centra Token (CTR), an ERC20 token issued on the Ethereum blockchain, in Centra’s ICO. Defendants promoted the Centra ICO by touting nonexistent relationships between Centra and well-known financial institutions, including Visa, Mastercard, and The Bancorp and cheated thousands of investors.

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 another legal tender. In reality, the SEC alleges, Centra had no relationships with Visa or MasterCard.

The SEC also alleges that to promote the ICO, Sharma and Farkas created fictional executives with impressive biographies, posted false or misleading marketing materials to Centra’s website, and paid celebrities to tout the ICO on social media.

They ran the scheme from July 30, 2017, through October 5, 2017.

Though Farkas made flight reservations to leave the country, he was arrested before he was able to board his flight.

The SEC’s complaint, filed in federal court in the Southern District of New York, charges Sharma and Farkas with violating and aiding and abetting Centra’s violations of Section 5(a), 5(c) and 17(a) of the Securities Act of 1933, and 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

 


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