Initial Coin Offering (ICO) have received a lot of scrutiny due to the alarming number of fraudulent activities that could and have taken place. The SEC has been investigating fraudulent activities and has now charged two individuals for what it alleges was a fraudulent initial coin offering that raised over $32 million last year.
Sohrab Sharma and Robert Farkas co-founded Centra Tech Inc., the individuals and company in question, the SEC says that the company has sold unregistered investments through a token. Both individuals told potential investors that the company was working on a Visa and MasterCard-backed debit card that would covertly cryptocurrencies into US dollars, but SEC has alleges that the company wasn’t actually working with either of those companies. In addition, both co-founders apparently made up executives with impressive backgrounds and shared misleading information on the company website.
“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 in a statement. “As the complaint alleges, these and other claims were simply false.”
Not only did they lie about their executives and what the company was doing, they also paid celebrities to talk about its ICO. These celebrities included Floyd Mayweather and DJ Khaled. According a class action complained filed in December against Centra and the founders, it alleged that the company violated US securities law and had misled investors.
The SEC is now seeing permanent injunctions, refunds for fraudulent money that was raised and a ban on Sharma and Farkas from participating in securities offerings or serving as officers in a public company. Both individuals are also facing criminal charged from US attorney’s office in the southern district of New York.