Indian-Origin Man, Associate Arrested for Alleged $32 Million Fraud in U.S.

The U.S. Securities and Exchange Commission on April 2 arrested an Indian-origin man and his business associate for allegedly orchestrating a fraudulent initial coin offering (ICO) that raised more than $32 million from thousands of investors  last year, PTI reported. The men in question are Sohrab “Sam” Sharma and Robert Farkas, the co-founders of Centra Tech, a cryptocurrency startup that offers financial services.

The U.S Attorney’s Office for the Southern District of New York also filed criminal charges against the duo as their start-up offered unregistered investments through a “CTR Token,” saying it planned to create a cryptocurrency debit card backed by Visa and Mastercard which could be used at stores just like a credit card. The cards would allow their customers to instantly convert hard-to-spend cryptocurrencies into U.S. dollars or other legal tenders. Their company had no relationship with credit card companies such as Visa or Mastercard for this to be possible, the complaint said.

According to the SEC, the duo, in order to promote the ICO, made up fictional executives with “impressive biographies,” posted false or misleading marketing materials to the Miami-based company’s website and paid celebrities to market the ICO on social media for investors. Centra Tech also got endorsements from boxing champion Floyd Mayweather, Jr. and music producer DJ Khaled.

The fake profile was pointed out by Business Insider last November. At that time, the company attributed them to mistakes made by freelancers.

As per the complaint filed by SEC, Farkas, who had made flight reservations to leave the country, was arrested before he was able to board his flight. “We allege that Centra sold investors on the promise of new digital technologies by using a sophisticated marketing campaign to spin a web of lies about their supposed partnerships with legitimate businesses,” Stephanie Avakian, the co-director of the SEC’s Division of Enforcement, was quoted as saying by PTI.

Filed in federal court in the Southern District of New York, the SEC charged Sharma and Farkas with violating the anti-fraud and registration provisions of the federal securities laws. The agency also filed related civil charges against the two. It seeks permanent injunctions, return of allegedly ill-gotten gains plus interest and penalties, as well as bars against Sharma and Farkas serving as public company officers or directors and from participating in any offering of digital or other securities.

“Centra Tech is aware of the allegations and will not be commenting. Mr. Sharma and Mr. Farkas are represented by personal counsel who will be handling the matters,” a statement released by their attorney said.