• The founders of the fraudulent ICO may spend up to five years in prison.
  • The US authorities want to make a showcase event out of this project.

The US prosecutors insisted on a severe sentence for Robert Farkas, the co-founder of the cryptocurrency project Centra Tech, for carrying out a fraudulent ICO. The federal authorities seek "substantial" prison time for Farkas, who scammed unsuspecting investors out of millions of dollars. 

Farkas asks for home detention and community service, while the prosecutors find this penalty insufficient, citing the fraud's scope. Furthermore, in a sentencing submission filed by the government with the US District Court for the Southern District of New York, they also ask for three years' probation. 

A story of Centra Tech

Startup Centra Tech raised $32 million during the ICO in 2017. The project founders promised to issue Visa and Mastercard supported debit card called Centra Card. They falsely claimed that had obtained regulatory permission for processing payments and money transfers in 38 US states. They said that the card would work anywhere Visa and Mastercard were accepted.

In fact, no debit card was issued and the investigators found out that the team had never partnered with Visa or Mastercard.

In 2018, Farkas and the other project founders, Sohrab Sharma and Raymond Trapani, were accused of financial and investment fraud. In summer 2020, Farkas pleaded guilty to conspiracy to commit securities and wire fraud. Sharma's lawyers said that he was also ready to admit charges of defrauding investors during the ICO. Each charge carries a maximum sentence of five years in prison. 

Celebrities to blame

A famous boxer, Floyd Mayweather, and a music producer, DJ Khaled, were the early backers of the project who actively promoted the ICO. The SEC alleged that Mayweather and Khaled received $100,000 and $50,000 respectively for providing media support for the ICO. However, neither of them disclosed that they were paid. 

As a result, the celebrities were held accountable for participating in illegal activities and paid a fine for a total amount of $767,500.

Prosecutors spent two years trying to find a non-existent Centra's CEO, known as "Michael Edwards."  He was presented as a Harvard graduate with extensive banking experience and was not the only fake team member. 

Frauds erode trust

The authorities note that fraudulent projects erode people's trust in ICO and prevent industry development. They believe that stringent punishment should become a warning signal to scammers who want to build their schemes around digital assets and innovative technologies. 

Centra Tech is not the only scam exposed by the US authorities. However, this is one of the high-profile cases as it involves celebrities and heavy investors' losses. 

The court will finally announce the sentence on December 15.


 

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