SEC alleges celeb-endorsed ICO was a fraud
Funds raised in the Centra Tech ICO were supposedly intended to build a suite of financial products.
The Securities and Exchange Commission (SEC) has charged an initial coin offering (ICO), Centra Tech, and its co-founders with fraud, after the startup raised more than $32 million from thousands of investors in 2017.
The SEC alleges that Sohrab Sharma and Robert Farkas “masterminded a fraudulent ICO”, selling unregistered securities via a cryptocurrency token. Criminal authorities have separately charged and arrested both men.
Funds raised in the ICO were supposedly intended to build a suite of financial products. For example, one of these products was meant to be a debit card backed by Visa and MasterCard that would instantly convert digital currencies into US dollars. The SEC alleges that Centra had no relationships with Visa or MasterCard.
The pair reportedly “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”.
“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,” SEC Division of Enforcement co-director Stephanie Avakian said. “These and other claims were simply false.”
One of these celebrities was boxing superstar Floyd Mayweather. The athlete endorsed the ICO late last year on Instagram. However, the post advocating his support has since been removed from the social media platform.
“Endorsements and glossy marketing materials are no substitute for the SEC’s registration and disclosure requirements as well as diligence by investors,” Avakian added.
The SEC has charged Sharma and Farkas with violating the anti-fraud and registration provisions of federal securities laws. The complaint seeks permanent injunctions, the return of allegedly misappropriated gains plus interest and other 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.
A number of celebrity-backed ICOs have popped up in recent months, some receiving scrutiny from authorities.
For example, the New Jersey Bureau of Securities issued a cease and desist order against Bitcoiin, otherwise known as Bitcoiin2Gen (B2G). The company recently enlisted film actor Steven Seagal as its brand ambassador.
However, late last month the founders of the controversial cryptocurrency, along with Seagal, withdrew their association with the cryptocurrency company in order to reportedly help establish total decentralization.
Boxing superstar and Filipino senator Manny Pacquiao signed on as the latest celebrity cryptocurrency ambassador, announcing plans for an initial coin offering (ICO) on Global Crypto Offering Exchange (GCOX). Other notable GCOX investors include former English national football striker Michael Owen.
Wu-Tang Clan, a hip-hop collective from Staten Island, New York City, are revered as one of the greatest rap groups of all time. One of the founding member’s offspring, Young Dirty, decided to launch a cryptocurrency.
Low-cost carrier AirAsia is considering entering the cryptocurrency space through the launch of an initial coin offering (ICO) which would become part of the Southeast Asian airline’s BIG Loyalty frequent flyer program.
You can learn all about different exchanges, understand exactly how to buy and sell cryptocurrencies, calculate your taxes, discover digital wallets to hold assets and explore a list of all the alternative coins on the market.
Latest cryptocurrency news
- 14-day crypto predictions: As FTX collapse effects linger, sentiment shifts to bearish on Bitcoin
- Crypto market crisis: FTX on the verge of bankruptcy
- 14-day crypto predictions: As cryptocurrencies drop, sentiment shifts to neutral on Bitcoin
- Binance to purchase FTX in bailout offer
- 14-day crypto predictions: As cryptocurrencies hold their ground, sentiment shifts to bullish on Bitcoin
Picture: Shutterstock
