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Centra Tech Founder Sentenced to Prison for $25M ICO Scam

Robert Farkas was the co-founder of cryptocurrency firm Centra Tech. He was sentenced to one year for operating an initial coin offer that defrauded his victims by $25 million.

The US Department of Justice stated that Farkas was charged with conspiring to commit wire and securities fraud. Initial charges against Farkas included a sentence of 5 to 7 years, as well as a maximum fine of $250,000.

Farkas and Co-defendants Sohrab Singh and Raymond Trapani created Centra Tech in 2017 with the intention of offering cryptocurrency-related financial products. They conned victims into spending more than $25,000,000 to create a debit card that allows users to use cryptocurrency to purchase at any merchant accepting Visa and Mastercard.

“Farkas, along with his co-conspirators, created fictitious executives to deceive investors into paying millions of dollars for a fraudulent ICO. They also forged business relationships with legitimate institutions. Ilan Graff, US Attorney, stated that frauds such as this will be pursued aggressively, regardless of whether they involve traditional securities, newer financial instruments, or crypto-assets.

Farkas and his fellow conspirators spent a few millions dollars collectively on ICO tokens that were worthless. However, their money was used to fund a lavish lifestyle.

Celebrities were caught up in the ICO Mania

The executive team also lied about having a Harvard-educated chief executive officer and other aspects of the business. In order to attract investors, the promotional content that they used on their website was fake. The price of CTR, its token, was artificially inflated. This was part of a “pump and dump” scheme that used investor cash. It was ultimately responsible for the plummeting value of their tokens.

This ruling comes at a time when the US government and its regulatory agencies intensify their crackdown on cryptocurrency fraud.

The case began with a 2018 civil complaint, which was stayed while the criminal case was filed. The SEC also filed an action against Floyd Mayweather, a retired boxer, and DJ Khaled for promoting Centra Tech’s ICO and its Centra Card.

The SEC stated that anyone selling investments or promoting them must comply with federal securities laws, which require anyone who promotes a sale to disclose their financial relationships to the company.

ICO operators and sometimes’scammers’ were trying to capitalize on the intersection between celebrities , cryptocurrency enthusiasts, to grab money from investors in this hot market. The US Securities and Exchange Commission (SEC), was forced to issue an official statement directing the celebrities involved to disclose the nature, scope and amount the compensation they received for their endorsement.

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