Indian American Startup Co-Founder Accused in Cryptocurrency Scam
The three startup co-founders are accused of devising a scheme that defrauded investors of digital currency worth more than $60 million.
A startup co-founder, along with two other co-founders of the cryptocurrency company Centra Tech, were indicted on May 14 for allegedly devising a scheme to defraud investors through a digital currency scam. Authorities seized digital currency worth more than $60 million allegedly raised from the victims of the scheme, PTI reported.
The four-count indictment placed before the Southern District Court of New York carries a punishment of a total of up to 65 years in prison.
Sohrab “Sam” Sharma, 27, Raymond Trapani, also 27, and Robert Farkas, 31, were charged with conspiracy to commit securities and wire fraud by devising a scheme to get potential investors to invest millions of dollars’ worth of digital funds for the purchase of unregistered securities, which was in the form of digital currency tokens. The tokens were issued by Centra Tech.
The three men were arrested last month based on a criminal complaint, according to U.S. attorney Robert Khuzami. After their arrest, the Federal Bureau of Investigation seized 91,000 Ether units, which had digital funds allegedly raised from the victims of the scheme. The seized digital currency is said to be worth more than $60 million.
The three men founded Centra Tech after working at a luxury car rental company called Miami Exotics in Florida, as per the prosecution.
“As alleged, the defendants conspired to capitalize on investor interest in the burgeoning cryptocurrency market. They allegedly made false claims about their product and about relationships they had with credible financial institutions, even creating a fictitious Centra Tech CEO,” Khuzami was quoted as saying.
The allegations in the indictment stated that around July last year, the three men, all residents of Florida, began soliciting investors to purchase unregistered securities, in the form Centra Tech-issued digital tokens through “initial coin offering.”
As a part of the scheme, they allegedly gave an impression to potential investors that Centra Tech had formed partnerships with Bancorp, Visa and Mastercard for issuing of Centra Cards licensed by Visa or Mastercard. Centra Tech had no partnerships with Bancorp, Visa, or Mastercard, the indictment said.
They apparently also told the investors that the company had money transmitter and other licenses in 38 states.
Due to the alleged claims made by them and the misleading advertisements done on social media, investors put in millions of dollars’ worth of digital funds in investments for the purchase of Centra Tech tokens. By October last year, which was the end of the company’s initial coin offering, the digital funds from victims went up over $25 million. The digital funds are now worth more than $60 million because of appreciation in the value of the funds raised from victims.
The Securities and Exchange Commission also filed a separate civil charges against Sharma, Trapani, and Farkas.