Sam Sharma, who co-founded cryptocurrency firm Centra Tech, has been sentenced to jail for eight years after pleading guilty to operating an initial coin offering that defrauded his victims to the tune of $25 million.
In a statement by the US Department of Justice, Sharma was accused of conspiring to commit securities fraud, wire fraud, and mail fraud.
Sam, along with co-defendants, Robert Farkas and Raymond Trapani, founded Miami-based Centra Tech in 2017 to offer cryptocurrency-related financial products. The trio duped victims into committing more than $25 million to develop a debit card allowing users to make purchases with cryptocurrency at any business accepting Visa or Mastercard.
“Sohrab Sharma led a scheme to deceive investors by falsely claiming that the start-up he co-founded had developed fully functioning, cutting-edge cryptocurrency-related financial products. In reality, Sharma’s most notable inventions were the fake executives, fake business partnerships, and fake licenses that he and his co-conspirators touted to trick victims into handing over tens of millions of dollars,” said US Attorney, Ilan Graff.
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While ICO investors collectively forked out a few million dollars for what turned out to be worthless tokens, Sohrab and his co-conspirators used their money to fund an extravagant lifestyle.
Celebrities Were Caught Up in the ICO-Mania
In addition to this, the executive team lied in about having a Harvard-educated CEO and other aspects of their business. The promotional content they displayed on its website was fictitious, and the price of its token, CTR was artificially inflated in order to attract investment. This was part a ‘pump and dump’ scheme using investor cash and was ultimately blamed for plummeting the value of their associated tokens.
This case originated with a civil complaint filed in 2018, which was stayed pending the criminal case filed earlier last year. Moreover, the SEC filed an action against celebrities, including retired boxer, Floyd Mayweather and DJ Khaled, for promoting Centra Tech’s ICO and its ‘Centra Card’.
At the time, ICO operators, and sometimes ‘scammers’, had been trying to capitalize on the intersection of celebs and cryptocurrency enthusiasts to grab money from investors in the hot market. The trend of celebrity endorsements even forced the US Securities and Exchange Commission (SEC) to release an official statement ordering the involved celebrities to disclose the nature, scope and amount of compensation received in exchange for the promotion.