The agency said it charged Robert Farkas and Sohrab Sharma, the co-founders of Centra Tech, with fraud after they raised $32 million by selling “unregistered securities.”
While the ICO startup claimed the funds would go toward developing financial products backed by Mastercard and others, the SEC said Centra had no relationship with either payment card network. The agency further stated that Farkas and Sharma created false marketing material, which was including fictional executives.
The SEC also alleges that the founders paid celebrities to promote the initial coin offering.
These celebrities appear to include boxing champion Floyd “Money” Mayweather, who endorsed Centra in September last year, though his Instagram posts has since been removed.
In a recent press release, SEC Division of Enforcement co-director Steve Peikin stated:
“As we allege, the defendants relied heavily on celebrity endorsements and social media to market their scheme. Endorsements and glossy marketing materials are no substitute for the SEC’s registration and disclosure requirements as well as diligence by investors.”
Centra Tech and its founders were also the targets of a class-action lawsuit filed in December of last year, which claimed that the startup’s CTR token was essentially an unregistered security.
The SEC stated that both Farkas and Sharma were arrested and charged by law enforcement officers.