The US Securities and Exchange Commission (SEC) charged two co-founders of a supposed financial services start-up with organizing a fraudulent initial coin offering (ICO), the SEC announced in a press release April 2.

The SEC says the the co-founders of Centra Tech. Inc., Sohrab Sharma and Robert Farkas, were arrested and charged after raising $32 mln in unregistered investments through a “CTR Token”. Farkas had made arrangements to leave the country, but was detained before boarding his flight.

According to the SEC, Sharma and Farkas claimed the company would offer a variety of financial products, including a debit card backed by Visa and MasterCard, with which users could instantly convert cryptocurrencies into US dollars and other legal tender. The SEC says that no such agreement or relationship existed between Centra Tech. Inc. and Visa or Mastercard.

The US financial watchdog further alleges that Sharma and Farkas promoted their fraudulent ICO by creating fictional executives with impressive resumes and biographies, posting “false or misleading” market materials, in addition to paying celebrities to promote the ICO. American boxer Floyd Mayweather supported the ICO on Instagram in a post which has since been removed. Stephanie Avakian, the Co-Director of the SEC’s Division of Enforcement said of the charges:

"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."

Sharma and Farkas have officially been charged with violating anti-fraud and registration provisions of federal securities laws. The SEC is seeking permanent injunctions and a return of their gains plus interest and penalties. The SEC also intends to bar Sharma and Farkas from serving as public company officers or directors and from participating in any offering of securities, digital or otherwise.

In November of last year, Cointelegraph reported that the SEC warned investors that celebrity-endorsed ICOs could be illegal. The commission claimed that celebrities who promote token sales could be breaching “anti-touting laws” if they do not disclose their compensation.