Fraudulent Schemes Result in Indictment of Crypto Company Founders
The US Department of Justice indicted three founders of a cryptocurrency company on Monday in the Manhattan federal court. The company raised $25 million through an initial coin offering for financial products related to crypto projects. The company fraudulently claimed to have licenses to operate in 38 states. It also claimed to partner with top companies like Visa, MasterCard and Bancorp for issuing its own cards.
The company in question is Centra Tech and its founders are Robert Farkas, 31, Raymond Trapani, 27, and Sohrab Sharma, 27. All the founders are based in Florida and were arrested last month. The FBI and US Attorney’s Office of Southern District of New York also seized 91,000 ether that had been collected in the name of the ICO. They claimed to create a financial product, in the form of a debit card. The DOJ described it as an instrument that “allowed users to spend various types of cryptocurrency to make purchases at any establishment that accepts Visa or MasterCard payment cards.”
Robert Khuzami, attorney for the United States, said, “As alleged, 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. Whether traditional or cutting-edge, investment vehicles can’t legally be peddled with falsehoods and lies.”
In July 2017, the three started asking investors to buy unregistered securities from them, in the form of digital tokens issued by the company. They had even made fraudulent documents suggesting that they have partnerships with some of the biggest names in debit and credit cards. This was popularized through oral and written mediums as well. At the time of issue, the tokens were worth $25 million but now their worth has gone up too $60 million, thanks to the appreciation in prices of digital tokens. They could have been worth even more during December 2017, when ethereum reached record highs.
The DOJ found that the statements made by the founders were false and the three were “well aware” of the falsehoods that they were propagating. Michael Edwards, the purported CEO and other members of the executive team of the company are also fictitious people. They were fabricated from thin air to appeal to their investors and make them believe that the company is functioning well.
The DOJ also found some text massages sent by Sharma to Trapani in late July 2017. In one of the messages, he asks Trapani to find someone who could look like ‘Michael’. He also said that the CEO will later be married to ‘her’- another employee they had fabricated, and then they both will be killed in an accident. The Justice Department has slapped a four-part indictment on all three founders. One count for ‘securities fraud’ brings a sentence of five years while the other three carry a sentence of 20 years each. Each count comes with financial penalties as well.
Civil charges have also been filed by the US SEC against the trio.