Co-founder of the cryptocurrency firm Centra Tech admitted to conspiring to dupe investors into investing $25 million into the company by lying about an initial coin offering (ICO), the Justice Department said.
Robert Farkas, 33, and two other founders of Central Tech Inc., Sohrab Sharma, and Raymond Trapani were charged in 2018 with misleading investors by claiming to have developed a debit card, the “Centra Card,” that supposedly allowed users to make purchases using cryptocurrency at any business accepting Visa and Mastercard.
Before founding Centra Tech, the trio worked at a luxury car rental company in Florida called Miami Exotics, according to prosecutors.
They got celebrities including boxer Floyd Mayweather and music producer DJ Khaled to promote their ICO, who later settled with the U.S. Securities and Exchange Commission but didn’t admit or deny guilt in the settlement.
From July 30, 2017, through October 5, 2017, Farkas and other co-founders solicited investors to purchase unregistered securities in the form of digital tokens “CTR Tokens” issued by Centra Tech through an ICO.
The claims made by Farkas at that time were false including the purported Harvard-educated chief executive officer “Michael Edwards” who was a fictional person fabricated to dupe investors. Cetra Tech also didn’t have any partnership with Bancorp, Visa, or Mastercard and they neither have any money transmitter and other licenses in 38 states as claimed.
Farkas pleaded guilty on Tuesday in federal court in Manhattan of securities fraud conspiracy and wire fraud conspiracy, appearing by phone before the US Magistrate Judge James Cott.
He faces as much as a decade in prison but prosecutors agreed to seek a sentence of 70 to 87 months and a fine of as much as $250,000 under a plea agreement. Sharma and Trapani will go to trial in November.