Floyd Mayweather-Backed ICO Co-Founders Arrested for Fraud

In what is turning into a real cautionary tale for the cryptocurrency community about the need to be wary of celebrity’s power, along with skepticism about most initial coin offerings (ICOs), the US Securities and Exchange Commission (SEC) announced an ICO endorsed by champion boxer Floyd Mayweather has officially been deemed a fraud.

Also read: Trezor to Implement Bitcoin Cash Addresses

The Cautionary Tale of Floyd Mayweather’s Entrance into the ICO Scene

SEC Halts Fraudulent Scheme Involving Unregistered ICO is the unambiguous title of an SEC press release issued 2 April 2018. “The Securities and Exchange Commission today charged two co-founders of a purported financial services start-up with orchestrating a fraudulent initial coin offering (ICO) that raised more than $32 million from thousands of investors last year. Criminal authorities separately charged and arrested both defendants,” the notice begins.

Centra Tech Inc. co-founders Robert Farkas and Sohrah ‘Sam’ Sharma are alleged to have “masterminded a fraudulent ICO in which Centra offered and sold unregistered investments through a CTR Token. Sharma and Farkas allegedly claimed that funds raised in the ICO would help build a suite of financial products. They claimed, for example, to offer a debit card backed by Visa and Mastercard that would allow users to instantly convert hard-to-spend cryptocurrencies into U.S. dollars or other legal tender,” the SEC complaint outlines.

Indeed, according to an expansive New York Times profile of the pair and Mr. Mayweather last year by Nathaniel Popper, “How Floyd Mayweather Helped Two Young Guys From Miami Get Rich,” 27 October 2017, “The debit card was described as a new product that would make it possible to spend virtual currencies anywhere Visa cards were taken. The company’s site showed Centra cards emblazoned with the Visa logo,” Mr. Popper exposed. “There was one problem with this plan. The company had not been approved, or had even applied, to run a Centra card on the Visa network, a spokeswoman for Visa said. After The New York Times reached out to Visa this month, Centra took all the mentions of Visa off its website.”

The SEC alleges, “In reality, … Centra had no relationships with Visa or Mastercard. The SEC also alleges that to promote the ICO, Sharma and Farkas created fictional executives with impressive biographies, posted false or misleading marketing materials to Centra’s website, and paid celebrities to tout the ICO on social media.”

Buyer Beware

Mr. Popper noticed, “The primary business experience of Mr. Sharma and Mr. Farkas was at Miami Exotics, a luxury car rental business that the two built.” In September of last year, Mr. Mayweather “told his 13.5 million followers on Facebook not once but twice that they should buy a new virtual currency known as the Centra token. ‘Get yours before they sell out,’ he wrote above a picture of himself admiring the many boxing title belts he had been awarded over the years. ‘I got mine and as usual I’m going to win big with this one!’”

Mr. Mayweather has also endorsed at least two other coins, Hubiits and Stox, at times referring to himself as ‘Crypto Mayweather,’ a twist on his ring name, ‘Money Mayweather.’ Mr. Popper continues, “A basic background check would have turned up the numerous run-ins with the law that Mr. Sharma, the company president, has had. Mr. Sharma has been sued in Florida and New York several times on allegations of unpaid bills and business deals gone sour. Twice, people have accused him in court of trying to fraudulently sell or lend them cars that he didn’t own, and twice he has been evicted for claims that he failed to pay rent.”

As The New York Times piece was being put together, Mr. Sharma was indicted for perjury shortly after Centra finished a fundraising round. In 2016, Mr. Sharma was arrested for suspicion of drunk driving his white Maserati. Mr. Popper ominously foreshadows Mr. Sharma as saying, “I’m obviously not comfortable with that situation. But it’s not that I did something so intensely crazy that investors need to worry.”

The SEC’s Stephanie Avakian outlines the complaint, “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. As the complaint alleges, these and other claims were simply false.” Mr. Sharma and Mr. Farkas were charged with breaking federal securities laws governing anti-fraud and registration. “The complaint seeks permanent injunctions, return of allegedly ill-gotten gains plus interest and penalties, as well as bars against Sharma and Farkas serving as public company officers or directors and from participating in any offering of digital or other securities. In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Sharma and Farkas.”

Would you invest in a celebrity-backed ICO? Let us know in the comments below.

Images via Shutterstock, Instagram.

Save 15% on your first order today at the Bitcoin.com Store! Just type ‘BCHPLS‘ to save at checkout.