Founders of Centra Tech’s Floyd Mayweather-Endorsed ICO Indicted for Securities Fraud

Jordana Sacks
  • ​​​​The three co-founders of crypto firm Centra Tech have been indicted by a grand jury.
  • Raymond Trapani, Sohrab Sharma, and Robert Farkas all stand accused of attempted fraud.

Monday was a busy day for Centra Tech founders Raymond Trapani, Sohrab Sharma and Robert Farkas, who each found themselves indicted by a grand jury following accusations of attempted theft.

According to the US Attorney for the Southern District of New York, the three men were allegedly planning to defraud their investors through a sale of the company’s tokens.

Following investigations, US Attorney Robert Khuzami revealed that authorities had recovered in excess of $60 million in funds from the three co-founders.

Trapani, Sharma, and Farkas have thus been charged with counts of conspiracy, the commission of securities, and wire fraud.

According to a statement released by The United States Attorney’s Office, Mr Khuzami said that the three men created: “a scheme to induce victims to invest millions of dollars’ worth of digital funds for the purpose of unregistered securities, in the form of digital currency tokens issued by Centra Tech.”

In addition to this, it is claimed that Trapani, Sharma, and Farkas also withheld important information regarding, in particular, the start-up’s claims about ties to payments companies, and in doing so, knowingly misled investors.

The token sale in question gained a large amount of attention following its endorsement by heavyweight boxer Floyd Mayweather, who claimed to have worked with Visa and Mastercard to create certain financial products. According to the SEC, however, such partnerships never actually existed.

The charges against the co-founders were first revealed in April 2018, when the US Securities and Exchange Commission initially filed fraud charges against Sharma and Farkas, before the Department of Justice made a case for criminal charges against all three of the men involved.

Sharma, Farkas, and Trapano are currently in custody pending further action from the courts.

Circle Pay to Shutter Doors, in Wake of Poloniex Troubles and Circle Layoffs

Circle, a fintech startup backed by the likes of Goldman Sachs, Bitmain, and Baidu, announced that it would discontinue (or “sunset”) its mobile-based payments app, Circle Pay. Pay had been a competitor for apps like Venmo, Cash App, and Revolut.

The process should be complete by the end of July, when all users’ funds will be returned to associated bank accounts. No explicit reason was given for the closure.

Circle got off the ground in 2013, and last year bought the Poloniex cryptoasset exchange, which many saw as a sign of increasing institutional interest at the time. More recently, Circle launched a USD-pegged stablecoin, USD Coin (USDC), which is legally audited to prove USD backing.

More recently, CryptoGlobe reported that Circle cut their staff by 10% (30 people), with CEO Jeremy Allaire pointing to “an increasingly restrictive regulatory climate” in the U.S.; a climate which apparently forced circle to remove nine cryptoassets from trading on their exchange. Indeed, Bittrex and Binance have both this month followed in Circle’s footsteps, as it were, with massive curtailments of their U.S. trading offerings.

Poloniex Troubles

Poloniex, a once central cryptoasset exchange in the industry, has hit a rough patch recently, when its leverage trading system proved unable to function correctly and pay the winning counterparties of a trade.

This occured when the price of an obscure cryptoasset, CLAM, collapsed, and with it the long positions of some Poloniex customers. The margin short trades could not be repaid because the principals were also held in CLAMs, rather than bitcoin.

Poloniex made the decision to distribute this loss over all of its margin traders, which make up only 0.4% of Poloniex customers according to the exchange. Poloniex were criticized both for “socializing” losses in this way, and for allowing such highly leveraged trading on low liquidity assets.