Crypto investors who may have fallen for a celebrity-endorsed ICO may find solace in the players behind it being indicted for fraud.
Boxing champ Floyd Mayweather, notoriously known for flashing cash around, endorsed an outfit called Centra Tech last year. As it turns out, the startup seems to be a fraud, and the players behind it have been caught in the crosshairs of the U.S. Department of Justice, as well as the U.S. Securities and Exchange Commission.
This week, the U.S. Department of Justice announced that the players behind this ICO had been indicted by a grand jury. The action comes about a month after the U.S. Securities and Exchange Commission filed fraud charges against the alleged mastermind behind the ICO, Raymond Trapani.
The Mayweather connection
Most importantly about this alleged fraud is that the boxer, Mayweather, has had no charges filed against him. For now, he appears to be simply one of many celebrities who endorsed ICOs without knowing the set up was a scam.
In fact, the SEC went through the pain of putting out a notice warning celebrities that they should steer clear of endorsing ICOs because such actions could run afoul of SEC regulations.
No matter, this particular Centra Tech ICO almost immediately drew the ire of the U.S. government. As noted above, the SEC, in April, filed fraud charges against the alleged mastermind behind the ICO, Trapani. These charges made for the third of its kind against this ICO.
Like the SEC, the Justice department found this ICO to be fraudulent and presented its case to a federal grand jury. In making its case, the Justice department and the Federal Bureau of Investigation seized 91,000 Ether units consisting of digital funds raised from victims as part of the charged scheme.
In its findings, the department has valued this seizure at more than $60 million.
Robert Khuzami, U.S. Attorney for the Southern District of New York, found three wrongdoers to be at the core of the scheme. They are Sohrab Sharma, Raymond Trapani, and Robert Farkas. According to a release from Khuzami’s office, these people:
“…purported to offer cryptocurrency-related financial products, with conspiring to commit, and the commission of, securities and wire fraud in connection with a scheme to induce victims to invest millions of dollars’ worth of digital funds for the purchase of unregistered securities, in the form of digital currency tokens issued by Centra Tech, through material misrepresentations and omissions.”
Stunning allegation
The Justice department also alleges that the defendants conspired to capitalize on investor interest in the burgeoning cryptocurrency market. They allegedly made false claims about their product and about relationships they had with credible financial institutions, even creating a fictitious Centra Tech CEO.
There’s this from the Justice department’s announcement:
“With respect to Centra Tech’s purported CEO “Michael Edwards,” SHARMA text-messaged TRAPANI on or about July 29, 2017, that they “Need to find someone who looks like Michael,” “Team photos,” “He’s real lol,” “Everyone real,” “Except Jessica,” “And Mike.” Similarly, SHARMA later wrote during that same exchange: “Gonna kill both Ceo and her,” “Gonna say they were married and got into an accident.”
As if creating a fake CEO wasn’t enough, the trio is being accused of other actions that are just as outrageous.
The scheme allegedly went like this.
The trio duped the unwitting by offering a debit card they said could be used to make various types of cryptocurrency purchases wherever Visa and Mastercard were accepted. Once hooking investors, back in July 2017, the trio started soliciting investors to purchase unregistered securities in the form of digital tokens issued by Centra Tech, through the ICO.
The Justice department broke down the falsehoods and wrongdoings as follows:
- Centra Tech claimed to have an experienced executive team with impressive credentials, including a purported CEO named “Michael Edwards” with more than 20 years of banking industry experience and a master’s degree in business administration from Harvard University
- Centra Tech had formed partnerships with Bancorp, Visa, and Mastercard to issue Centra Cards licensed by Visa or Mastercard
- Centra Tech had money transmitter and other licenses in 38 states, among other claims
Based in part on these claims, victims provided millions of dollars’ worth of digital funds in investments for the purchase of Centra Tech tokens, according to the Justice department.
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. Due to appreciation in the value of those digital funds raised from victims, those digital funds are presently worth more than $60 million.
This article appeared first on Cryptovest
