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A US federal court has indicted three founders of a company purported to offer cryptocurrency-related financial products and have raised $25 million in an initial coin offering. In addition to claiming to have licenses in 38 states, the company also claimed partnerships with Bancorp, Visa, and Mastercard to issue its own cards.
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Three Founders Indicted
The US Department of Justice (DOJ) announced on Monday that the founders of a cryptocurrency-related company have been indicted in the Manhattan federal court.
Florida residents Sohrab Sharma, 27, Raymond Trapani, 27, and Robert Farkas, 31, are co-founders of a startup called Centra Tech. The company purported to offer cryptocurrency-related financial products including the Centra Card, a debit card which supposedly âallowed users to spend various types of cryptocurrency to make purchases at any establishment that accepts Visa or Mastercard payment cards,â the DOJ described.
The three were arrested last month. The US Attorneyâs Office of Southern District of New York and the Federal Bureau of Investigation (FBI) seized 91,000 ether which was âraised from victims as part of the charged schemeâ in an initial coin offering (ICO).
The attorney for the United States, Robert Khuzami, explained:
As alleged, the defendants conspired to capitalize on investor interest in the burgeoning cryptocurrency market. They allegedly made false claims about their product and about relationships they had with credible financial institutions, even creating a fictitious Centra Tech CEO. Whether traditional or cutting-edge, investment vehicles canât legally be peddled with falsehoods and lies.
ICO Worth $60+ Million
The three began âsoliciting investors to purchase unregistered securities, in the form of digital tokens issued by Centra Techâ through an ICO in approximately July. In oral and written materials, they falsely represented that Centra Tech had an experienced executive team and âhad formed partnerships with Bancorp, Visa, and Mastercard to issue Centra Cards licensed by Visa or Mastercard.â They also represented that the company âhad money transmitter and other licenses in 38 states, among other claims,â the DOJ revealed, adding:
Based in part on these claims, victims provided millions of dollarsâ worth of digital funds in investments for the purchase of Centra Tech tokens.
âIn or about October 2017, at the end of Centra Techâs ICO, those digital funds raised from victims were worth more than $25 millionâ â the amount which has now appreciated to more than $60 million.
False Statements
The Department of Justice found that statements made by the three to secure these investments âwere false,â emphasizing that the three âwere well aware of the falsity of such claims.â
For example, âthe purported CEO âMichael Edwardsâ and another supposed member of Centra Techâs executive team are fictitious people who were fabricated to dupe investors.â
The DOJ then described the scheme used to fabricate the CEO and another executive:
Sharma text-messaged Trapani on or about July 29, 2017, that they âNeed to find someone who looks like MichaelââŠSimilarly, Sharma later wrote during that same exchange: âGonna kill both CEO and her [another executive],â âGonna say they were married and got into an accident.â
Furthermore, the companyâs claimed partnerships and licenses were non-existent, the DOJ revealed, citing text messages between Trapani and Sharma discussing âCentra Techâs lack of actual partnerships with banks or credit card companies.â Another text message from Sharma to Trapani and Farkas says, âGotta apply for all licenses,â âShould I even say this.â
Four-Count Indictment
According to the Justice Departmentâs announcement:
All three of them are charged in a four-count Indictment.
One count is âconspiracy to commit securities fraud, which carries a maximum potential sentence of five years in prison.â The other three carry âa maximum potential sentence of 20 years in prison.â They are securities fraud, conspiracy to commit wire fraud, and wire fraud. Additionally, each charge also carries potential financial penalties. âThe maximum potential prison sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge,â the DOJ wrote.
Moreover, the US Securities and Exchange Commission (SEC) has separately filed civil charges against the trio.
What do you think of the DOJ indicting the three Centra Techâs founders? Let us know in the comments section below.
Images courtesy of Shutterstock, Twitter, and the DOJ.
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