Cryptocurrency Company Co-founder Sent To Prison For Fraudulent ICO

The co-founder of crypto investment firm Centra Tech, Inc. has been sentenced to one year and one day in prison in connection with his participation in a scheme to induce victims to invest more than $25 million dollars of digital funds in Centra Tech, according to a statement by the U.S. Department of Justice (DoJ).

Robert Joseph Farkas, 34, co-founded the Miami-based company with the purpose of offering cryptocurrency-related financial products. Farkas had previously pleaded guilty to conspiring to commit securities fraud and wire fraud. The prison sentence was imposed by the Manhattan federal court.

Farkas and his co-conspirators, Sohrab Sharma and Raymond Trapani, were charged for using material misrepresentations and omissions to solicit investors to purchase securities, in the form of digital tokens issued by Centra Tech, through an initial coin offering (ICO) beginning in July 2017.

They created fictitious executives and fabricated business relationships with legitimate institutions to dupe investors into handing over millions of dollars for a fraudulent ICO. Centra Tech also claimed it had money transmitter and other licenses in 38 states.

Further, they offered a purported debit card, the “Centra Card,” that supposedly allowed users to make purchases using cryptocurrency at establishments accepting Visa or Mastercard payment cards.

In or about October 2017, at the end of Centra Tech’s ICO, those digital funds raised from victims were worth more than $25 million. At certain times in 2018, as the defendants’ fraud scheme was ongoing, those funds were worth more than $60 million.

The ICO was reportedly promoted by boxer Floyd Mayweather and musician DJ Khaled, both of whom got entangled in legal issues due to their failure to disclose that they were paid for their involvement.

In 2018, the DoJ and the Federal Bureau of Investigation (FBI) seized, pursuant to judicially authorized seizure warrants, 100,000 Ether units, consisting of digital funds raised from victims who purchased digital tokens issued by Centra Tech during its ICO.

The U.S. Marshals Service sold the seized Ether units for approximately $33.4 million earlier this year. These funds and other forfeited fraud proceeds will be available for potential use in a remission program the DoJ intends to create to compensate victims of the Centra Tech fraud.

Farkas was also sentenced to three years of supervised release and was further ordered to forfeit $347,062.58 and a Rolex watch purchased with fraud proceeds.

Source: Read Full Article