An Indian-origin man and his business associate have been arrested and charged by federal authorities for masterminding a fraudulent initial coin offering (ICO) that raised more than USD 32 million from thousands of investors last year.
The Securities and Exchange Commission (SEC) yesterday charged Sohrab "Sam" Sharma and Robert Farkas, co-founders of a purported financial services start-up Centra Tech. In a parallel action, the US Attorney's Office for the Southern District of New York also slapped criminal charges against the duo.
The agency charged that Sharma and Frakas masterminded a fraudulent ICO in which Centra offered and sold unregistered investments through a "CTR Token." The two allegedly claimed that funds raised in the ICO would help build a suite of financial products and promised 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 tenders. In reality, however, Centra had no relationships with the credit card companies.
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.
According to the complaint, Farkas made flight reservations to leave the country but was arrested before he was able to board his flight. Sharma has also been arrested.
"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, adding that the claims were simply false.
The SEC's complaint, filed in federal court in the Southern District of New York, charges Sharma and Farkas with violating the anti-fraud and registration provisions of the federal securities laws.
The complaint seeks permanent injunctions, return of allegedly ill-gotten gains plus interest and penalties, as well as bars against Sharma and Farkas serving as public company officers or directors and from participating in any offering of digital or other securities.
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