Executives Behind Centra, the ICO Backed by Floyd Mayweather Charged of Fraud
All is not well with Centra, the initial coin offering endorsed by boxing star Floyd Mayweather and rapper DJ Khaled.
The Securities and Exchange Commission has now leveled charges against executives behind the project for flouting various regulations. The crowdfunding project is said to have raised $32 million from thousands according to a statement from the SEC. None of the celebrities is mentioned in the charges.
Sohrab Sharma and Robert Farkas are accused of violating registration and anti-fraud securities laws. The two are effectively being charged for selling unregistered investments through the Centra ICO.
They are further charged with claiming that the funds raised in the ICO “would help build a suite of financial products,” including debit cards when the company had no legitimate relationship with providers.
— Floyd Mayweather (@FloydMayweather) September 18, 2017
Centra had said in its promotional material that this would help customers easily convert crypto to fiat. It had been claimed that the card would be backed by Visa and MasterCard.
The two are also claimed to have created profiles on non-existent executives.
Farkas was allegedly attempting to fly out of the US before the arrest was made.
Comprehensive List of Crypto Products
Centra was offering a comprehensive list of cryptocurrency products including a wallets service, an exchange, market place, digital tokens and an open source custom blockchain as per its website.
According to the SEC statement, Centra “sold investors on the promise of new digital technologies by using a sophisticated marketing campaign,” said Steven Peikin, SEC’s co-director for Enforcement.
“Endorsements and glossy marketing materials are no substitute for the SEC’s registration and disclosure requirements as well as diligence by investors,” he added.
The SEC is seeking to have the two co-founders refund the funds and barred from serving in a public company. If the prayers of the SEC are granted, the two cofounders will also be barred from participating in digital and securities offerings in the future.
The announcement saw the value of CTR tokens drop by almost 70%. A unit is now trading for 0.05 having lost nearly 50% over the last 24 hours according to CoinMarketCap. Market capitalisation has now dropped below $4 million.
The ICO scene has been very active in the past year. More than $5 billion has been raised through the new crowd funding model in which investors support blockchain based start ups. Unlike IPOs, ICOs are not necessarily based on existing business models.
Scammers Taking Advantage
Because of lack of regulations the sector is also replete with scams masquerading as legitimate projects. In recent months governments have been trying to get a hold of the industry though interventions have tended to be heavy handed.
Some countries like France are however coming up with crypto-friendly legal frameworks to attract capital for start ups. Others include Malta and Switzerland.
Binance is reportedly planning to move to Malta after being recently hounded out of Japan while Bitfinex is planning to set up in Zug, Switzerland.