Mayweather ICO Founders Knocked Out by SEC for Fraud
The US Securities and Exchange Commission (SEC) and the Justice Department have leveled criminal charges against the founders of Centra Tech, which was backed by former world boxing champion Floyd Mayweather.
The securities regulator said Sharma and Farkas offered and sold unregistered investments through a "CTR token", telling would-be investors that the funds raised in the token crowd sale would go towards building "a suite of financial products". Both men have been separately charged by criminal authorities of the same crime according to the SEC's official press release.
Mayweather, who now has more than eight million followers on Twitter, hyped the offering by posting on the social media site: "Centra's (CTR) ICO starts in a few hours".
At the same time, the pair were hit with civil charges from the Securities and Exchange Commission. The authorities say the scheme's claims, to be backed by Visa and MasterCard and to easily allow users to convert crypto-assets into U.S. dollars or other currencies, were a "web of lies".
Federal agents have arrested the co-founders of an initial coin offering that was promoted by boxer Floyd Mayweather and music producer DJ Khaled.
"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", Stephanie Avakian, the co-director of the SEC's Division of Enforcement, was quoted as saying by PTI. By March 30, "Centra's bank accounts were depleted and most of its employees had been terminated". Farkas booked a flight to leave the country but was arrested before boarding, according to the SEC.
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The two people claimed to offer a debit card backed by Visa and Mastercard that allow people to convert cryptocurrency to US dollars to spend it in stores.
"In reality, the SEC alleges, Centra had no relationships with Visa or MasterCard", the United States body said in a statement. The agency further stated that Sharma and Farkas created false marketing material, including fictional executives. "The prospect of investing in a non-public start-up company may hold considerable allure, but buyers need to understand what they are buying".
The use of celebrities, particularly Mayweather, was also noted by the SEC, which added that the defendants "relied heavily on celebrity endorsements and social media to market their scheme".
The US's top financial watchdog has denounced an initial coin offering (ICO) which raised more than $32m a year ago, and was backed by celebrities including boxer Floyd Mayweather and DJ Khaled.
Read the full story about how Centra's founders raised $32 million here.
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