SEC Charges Two Florida Men in $32 Million ICO Scam

On April 2nd, 2018, the Securities and Exchange Commission (SEC) announced investment fraud charges against two Florida men. In a complaint filed in the United States District Court for the Southern District of New York, the SEC alleges that Sorbah Sharma and Robert Farkas, the co-founders of a company named ‘Centra Tech’, concocted an initial coin offering (ICO) fraud scheme. According to the SEC, Mr. Sharma and Mr. Farkas carried out the investment fraud by offering and selling fraudulent unregistered ICO investments to investors in Florida and throughout the United States.

SEC Allegations: The Centra Tech Investment Fraud Scheme 

Initial Coin Offerings (ICOs) 

In essence, an initial coin offering is a fundraising event. It is the cryptocurrency equivalent of an initial public offering (IPO). A company that is promoting an ICO is offering digital ‘coins’ or ‘tokens’ to investors in exchange for another asset. The SEC has previously noted that these are very risky investment opportunities, and that fraud is a major issue with ICOs. In this case, Mr. Sharma and Mr. Farkas were selling unregistered shares of their cryptocurrency company Centra Tech. In all, the two Florida men raised more than $32 million from investors. 

The experienced and Misleading Marketing of Centra Tech’s Technology 

Almost immediately after Centra Tech was formed, Mr. Sharma and Mr. Farkas began hard promoting their ICO online. The company relied heavily on celebrity endorsements. Among other things, actual and prospective investors were informed that Centra Tech was on the verge of releasing a new technology. Essentially, this technology was a credit card that would immediately make various cryptocurrencies ‘spendable’ at everyday stores.

Most notably, investors were informed that the Centra Tech card would be accepted at all locations that currently accept Visa or Mastercard. In fact, the marketing materials even mentioned that Centra Tech had an agreement in place with both Visa and Mastercard. Finally, prospective investors were informed that this technology was in the final stage of development and that public release was rapidly approaching. 

Fraudulently Raising Funds From Unsuspecting Investors 

The SEC believes that the vast majority of the claims made by Mr. Sharma and Mr. Farkas were false. Specifically, the SEC contends that the two men made materially false or misleading statements regarding the following three key points:

1. Centra Tech’s partnerships with major credit card companies and financial institutions;
2. The backgrounds and profiles of the company’s executives; and
3. The potential profits that investors would be able to make.

Despite that fact that Centra Tech’s founders repeatedly emphasized the company’s links to major credit cards companies, there were no such partnerships in place. In fact, in October of 2017, Visa sent Centra Tech three different cease-and-desist letters, demanding that company immediately stop using the Visa name and brand in its promotions.

Contact Our Miami Securities Fraud Attorneys Today

At Carlson & Associates, P.A, our experienced securities fraud lawyers are committed to fighting for the financial interests of investors in Florida. If you lost money investing in unregistered securities, we can help. Please call us today at 1-(305)-372-9700 to arrange a confidential consultation. With an office in Miami, we represent clients throughout the region, including in West Palm Beach, Fort Lauderdale, Hialeah, and Miami Beach.

Resources:

sec.gov/news/press-release/2018-53

sec.gov/litigation/complaints/2018/comp-pr2018-53.pdf