Centra Tech Inc. has been busted by SEC for issuing a fraudulent ICO defrauding $32 million

Fraudulent ICO

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The US Securities and Exchange Commission has arrested and charged two people for issuing a fraudulent Initial Coin Offering (ICO). The two co-founders who intended to start a financial services startup were arrested at the airport as they planned to depart the country. The two Sohrab Sharma and Robert Farkas of Centra Tech Inc. were arrested for raising $32 million unregistered investments through a CTR Token.

Sharma and Farkas were claiming that the company would offer different financial products which would include a debit card backed by MasterCard. According to them, this card would enable them to convert digital currencies like Bitcoin into US dollars among other benefits. According to SEC after investigation, there was no agreement between Centra Tech, and Visa or MasterCard existed.

The financial regulator and watchdog further claimed that Farkas and Sharma promoted the fraudulent activity by creating fictitious executives who had very impressive resumes and big biographies which posed misleading market materials and also using well-known celebrities to promote the ICO. According to SEC Americas greatest boxer, Floyd Mayweather supported the said ICO on an Instagram post which was later deleted.

According to Stephanie Avakian who is a co-director of the SEC Division of Enforcement:

“We suspect that Centra sold investors on a promise that they would offer new digital technologies by using a complicated marketing campaign to lie to everyone about the potential partnerships with legitimate businesses. After investigation, all these claims were false and meant to defraud the public.”

The two co-founders have been charged with violating the registration provisions and also violating the anti-fraud laws of the federal securities law. SEC has since started looking for permanent injunctions which will include the return of all the gains plus interests. More to that the commission will also work to stop Sharma and Farkas from serving as public company officers or even participating as directors. More to that they will also not be allowed to participate in any security offerings.

Also read: Sinochem Has Completed The First Gasoline Export Using A Blockchain System

In the past SEC warned investors that celebrity endorsed ICOs would not be allowed and would be termed as illegal. More to that the commission also stated that celebrities who would take part in the promotion of tokens would be breaching the anti-touting laws if they fail to disclose their compensation in the promotion.

ICOs have had many challenges due to fraudulent activities something which has led to some countries deciding to ban all ICO activities. Other have come up with very strict laws to help control the ICO sector.

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