‘Initial Coin Offering’ Duped Folks for $32 Million, SEC Says

MANHATTAN (CN) — In the latest legal attacks on an “initial coin offering,” the SEC and criminal prosecutors on Monday charged two co-founders of an alleged financial services startup, Centra Tech, with defrauding investors of $32 million.

The SEC and federal prosecutors claim that Sohrab “Sam” Sharma and Robert Farkas sold unregistered investments, “CTR tokens,” to thousands of investors last year.

“They claimed, for example, to offer a debit card backed by Visa and MasterCard that would allow users to instantly convert hard-to-spend cryptocurrencies into U.S. dollars or other legal tender,” the SEC said in a statement.

But Centra Tech had no relationships with Visa or MasterCard, the SEC said.

It said Sharma and Farkas also created fictional executives with phony biographies, posted false and misleading marketing materials on Centra’s website, and paid celebrities to tout it on social media.

Both men have been arrested — Farkas before he was able to board a flight out of the country, the SEC said.

The SEC seeks disgorgement, injunctions and penalties. Federal prosecutors filed parallel criminal charges in the same court.

A flurry of lawsuits have been filed this year, civil and criminal, against companies trying to piggyback on apparent success of bitcoins, whose alleged value has fluctuated wildly.

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