With the aim of tricking investors, start-up company Centra Tech made the public believe that it was having a partnership with credible companies like MasterCard and Visa to make a debit card for cryptocurrency operations — a crime that could earn it about twenty years in prison.
Centra Tech founders Robert Farkas and Sam Sharma were arrested first. Then about three weeks later, the third founder of the cryptocurrency firm, Raymond Trapani, was also arrested by criminal authorities. Following their arrest, Deputy U.S. Attorney for Manhattan Robert Khuzami explained to everyone that investing in virtual currencies is legal but trying to deceive investors is not, which is the reason for arresting the Miami-based founders.
The civil complaint stated that the SEC first notified Sharma of the ongoing investigation on Centra around mid of February. By March 30, “Centra’s bank accounts were depleted and most of its employees had been terminated.”
Last September, Centra Tech earned up to $32 million after selling its tokens to unsuspecting investors. Before it got so many of them to part with their money with the belief that it was legitimate, Centra Tech had to create fake executives with attractive profiles on its website, which has been “under maintenance” for some time now. The Centra token runs on the popular Ethereum blockchain.
Known celebrities like boxing champion Floyd Mayweather and award-winning record producer DJ Khaled promoted on social media the credit card that Centra Tech promised to offer. These stars displayed their credit cards on Instagram, endorsing the promises of digital currency enhancements by Centra Tech, which had a huge impact on the success of its token sales in September of 2017.
SEC Conducts Investigation
Investigations that eventually led to the founders’ arrest started long before now. As at February this year, the Securities and Exchange Commission called the attention of Sharma, who is also Centra Tech’s president, to let him know that his company was under investigation.
Robert Cohen, SEC Cyber Unit Chief, stated:
“We allege that the Centra co-founders went to great lengths to create the false impression that they had developed a viable, cutting-edge technology.”
He then added:
“Investors should exercise caution about investments in digital assets, especially when they are marketed with claims that seem too good to be true.”
Less than a month after that notification from the SEC, Centra Tech had sacked almost all of its workers, leaving only very few behind. Its finances had also been expended, leaving Centra Tech bank accounts empty.
Before the arrest, one of the founders, Farkas, tried to flee the United States. The complaint made it known that Farkas had booked his flight on the first of April, but the law caught up with him before he could leave the country. This act alone raised brows and served as a confirmation to those who were still skeptical about their crimes of fraud.
The SEC is seeking “permanent injunctions, the return of allegedly ill-gotten gains plus interest and penalties, as well as bars against Trapani prohibiting him from serving as a public company officer or director and from participating in any offering of digital or other securities.”
Sharma, who has been evicted twice from his home due to owed rent, already had legal issues before their Centra Tech fraud got exposed. New York Times made it known that he had charges linked to drunk driving, unpaid debts, and bad businesses.
The SEC has advised the public to be careful with investments endorsed by celebrities, hinting that they could be illegal if the celebrities do not disclose the amount of money they are paid for the advertisement.