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DOJ Charges ICO Co-Founder With Securities Fraud

The Department of Justice has unveiled fraud charges against another co-founder of cryptocurrency startup Centra, a move that comes weeks after two other founders were arrested and charged.

The U.S. Attorney’s Office for the Southern District of New York said Friday that Ray Trapani has been arrested and charged in connection with the company’s token sale, which was notably endorsed by heavyweight champion Floyd Mayweather, Jr.

Specifically, Trapani has been charged with one count of conspiracy to commit securities fraud, one count of conspiracy to commit wire fraud, one count of securities fraud and one count of wire fraud.

Fellow Centra founders Sohrab Sharma and Robert Farkas were sanctioned at the beginning of the month by the U.S. government, with actions by both the Securities and Exchange Commission (SEC) as well as the DOJ. Their startup first made headlines in September when the boxing champ endorsed their ICO – tied to a cryptocurrency-backed credit card – on social media. Subsequent reports cast doubt on the claims made by Centra regarding its card, particularly the contention that the firm had working relationships with Visa and Mastercard.

“As alleged, Raymond Trapani conspired with his co-defendants to lure investors with false claims about their product and about relationships they had with credible financial institutions. While investing in virtual currencies is legal, lying to deceive investors is not,” Deputy U.S. Attorney Robert Khuzami said in a statement.

Separately, the SEC filed charges against Trapani, according to the Justice Department.

Justice statue image via Shutterstock 

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Justice Department Sues Founders of Mayweather-Backed ICO

Criminal charges have been filed against the founders of an initial coin offering endorsed by heavyweight champion Floyd Mayweather, Jr., adding to the allegations levied Monday by the Securities and Exchange Commission (SEC).

Sohrab Sharma and Robert Farkas were arrested yesterday and hit with charges of fraud, as CoinDesk previously reported after the SEC filed suit in the U.S. District Court for the Southern District of New York.

According to statements from the U.S. Department of Justice, the two were accused of “conspiring to commit, and the commission of, securities and wire fraud in connection with a scheme to induce victims to invest more than $25 million in investments through material misrepresentations and omissions.”

Centra’s ICO centered around the claimed issuance of a credit card, though questions quickly arose about the claims that the startup had a relationship with payment giant Visa. That claim would later be referenced in the SEC’s complaint as well as the filings submitted by the Justice Department.

“The claims that Sharma and Farkas made to help secure these investments, however, were false. In fact, Centra Tech had no relationships with Bancorp, Visa, or Mastercard, and at least seven of those 38 states have no record of any such licenses being issued to Centra Tech,” officials said in a statement.

Data from CoinMarketCap shows that the token issued through the Central token sale has seen a sharp drop in value, sliding to less than $0.11 in the past day. Its price had exceeded $4 back in January, market data further shows.

Justice statue image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Class-Action Suit Targets ICO Promoted By Floyd Mayweather, Jr.

An initial coin offering (ICO) promoted by boxing champion Floyd Mayweather, Jr., is at the center of a newly filed class-action complaint.

Dated Dec. 13, the lawsuit names Sohrab Sharma, Raymond Trapani, Robert Farkas and William Hagner, as well as Centra Tech, Inc., as defendants, accusing them of violating U.S. securities law through a token sale that ultimately raised $30 million for the development of a cryptocurrency-focused debit card.

The filing comes more than a month after two of the firm’s founders left the startup. According to an Oct. 31 blog post from Centra, both Sharm and Trapani exited the project following the sale’s completion, as well as a profile of them and the ICO by The New York Times.

In the complaint, lawyers for the plaintiff alleged that the Centra sale constituted an unregistered offering and sale of securities.

They wrote:

“…in connection with Centra Initial Coin Offering (the “Centra ICO”), Defendants raised over $30 million in digital cryptocurrencies by offering and selling unregistered securities in direct violation of the Securities Act.”

The complaint also accused the defendants of misleading investors about the nature of its relationship with card networks Visa and Mastercard, as well as listing fake team members on its website.

The Centra ICO was notably promoted by Mayweather as well as music producer DJ Khaled – one of a number of examples of celebrity-endorsed token sales. The original posts by Mayweather on Instagram and Facebook that promoted the sale appear to have been deleted, and a post on Instagram by DJ Khaled is also unavailable as of press time.

Jacob Zowie, the plaintiff, is being represented by Komlossy Law and Levi & Korinsky LLP in the suit. Centra Tech and a representative for Mayweather did not immediately respond to a request for comment.

A full copy of the class-action complaint can be found below:

367102541 Rensel v Centra Tech Inc Etal 1 17 Cv 24500 JLK S D Fla Dec 13 2017 Class Action Complaint by CoinDesk on Scribd

Image Credit: Funtap / Shutterstock.com

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