Three co-founders of a startup company called Centra Tech, Inc., including an Indian-origin man, were indicted by a grand jury in the Southern District of New York, with conspiring to commit, and the commission of, securities and wire fraud.
The alleged fraud is in connection with a scheme to induce victims to invest millions of dollars’ worth of digital funds for the purchase of unregistered securities, in the form of digital currency tokens issued by Centra Tech, through material misrepresentations and omissions, a press release from the office of U.S. Attorney Robert Khuzami, May 14.
The grand jury indicted Sohrab Sharma, a/k/a “Sam Sharma,” Raymond Trapani, a/k/a “Ray,” and Robert Farkas, a/k/a “RJ,” a/k/a “Bob,” who were all arrested last month based on criminal complaints filed by this Khuzami’s Office charging them with the same crimes. The allegations contained in the charging documents in this case are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
All three of them are charged in a four-count Indictment with one count of conspiracy to commit securities fraud, which carries a maximum potential sentence of five years in prison; one count of conspiracy to commit wire fraud, which carries a maximum potential sentence of 20 years in prison; one count of securities fraud, which carries a maximum potential sentence of 20 years in prison; and one count of wire fraud, which carries a maximum potential sentence of 20 years in prison. In addition to potential prison sentences, each of these charges also carries potential financial penalties.
Following their arrests, the U.S. Attorney’s Office and the Federal Bureau of Investigation (“FBI”) seized 91,000 Ether units, consisting of digital funds raised from victims as part of the charged scheme. This seized digital currency is presently worth more than $60 million, the press release said. The case has been assigned to United States District Judge Lorna G. Schofield.
According to the allegations in the Indictment filed in this case, the criminal complaints previously unsealed in this case, and in other filings and statements at public court proceedings in the case, Sharma and Trapani worked together at a luxury car rental company in Florida called “Miami Exotics.” They and Farkas co-founded Centra Tech claiming to offer cryptocurrency-related financial productions, including a purported debit card, the “Centra Card,” that supposedly allowed users to spend various types of cryptocurrency to make purchases at any establishment that accepts Visa or Mastercard payment cards.
Court papers say that in approximately July 2017, the three co-founders began soliciting investors to purchase unregistered securities, in the form of digital tokens issued by Centra Tech, through a so-called “initial coin offering” or “ICO.” As part of this effort, they disseminated information via the internet, which claimed that Centra Tech had an experienced executive team with impressive credentials, including a purported CEO named “Michael Edwards” with more than 20 years of banking industry experience and a master’s degree in business administration from Harvard University, the press release notes; they also said that Centra Tech had formed partnerships with Bancorp, Visa, and Mastercard to issue Centra Cards licensed by Visa or Mastercard; and that Centra Tech had money transmitter and other licenses in 38 states, among other claims.
“Based in part on these claims, victims provided millions of dollars’ worth of digital funds in investments for the purchase of Centra Tech tokens,” authorities said. In or about October 2017, at the end of Centra Tech’s ICO, those digital funds raised from victims were worth more than $25 million, according to the press release. Those digital funds are presently worth more than $60 million.
“The representations that SHARMA, TRAPANI, and FARKAS made to help secure these investments, however, were false,” say prosecutors, adding, “In fact, the purported CEO “Michael Edwards” and another supposed member of Centra Tech’s executive team are fictitious people who were fabricated to dupe investors; Centra Tech had no such partnerships with Bancorp, Visa, or Mastercard; and Centra Tech did not have such licenses in a number of those states.”
In a separate action, the United States Securities and Exchange Commission (the “SEC”) has filed civil charges against Sharma, Trapani, and Farkas.