FINRA Lawyer Blog
Celebrity endorsements add an element of trust for investors who are just entering the ICO market. But the strategy did not turn out well for Centra Tech, as a third arrest has just been made in connection with the SEC’s allegations that the company defrauded investors out of over $25 million.
Earlier this year, I reported on the charges brought against Sohrab Sharma and Robert Farkas, and the public exposure of the alleged fraud.
Sharma, Farkas, and now Raymond Trapani have been charged with falsely advertising their ICO as having links with Visa, and Mastercard, which they claimed were backing their cryptocurrency-funded debit card, “Centra Card.”
Trapani was Centra Tech’s COO. According to the DOJ’s allegations, he co-conspired with Sharma and Farkas to deceive investors by posting a fake CEO bio on Centra Tech’s website and advertising non-existent agreements with established credit card companies.
The SEC’s original complaint against Centra Tech, Sharma, and Farkas has just been amended to include Trapani.
The three defendants, who used to run a luxury car rental company in Florida, enticed investors to entrust millions of dollars to a company that was supposedly run by “Michael Edwards” and “Jessica Robinson,” two executives with an impressive track record; the problem is that neither one of them existed.
The Centra Tech website and its social networks also echoed claims that Visa and Mastercard were backing Centra Card.
Evidence that was instrumental for Trapani’s arrest was found in private communications among the defendants, which were cited by prosecutors in their complaint. For example, on the day the SEC announced it was investigating REcoin, another ICO endeavor, Sharma wrote to Trapani and Farkas: “[The SEC] just shut down REcoin… Read the article… We gotta clean up every single thing that we can’t do… And can’t offer today.”
On another occasion, when a major bank referenced in Centra Tech ads sent them a cease-and-desist letter, Sharma wrote to his partners, “we gotta get that shit removed everywhere and blame freelancers lol.”
Trapani also wrote to Sharma asking him to “cook up” a false document that would enable him to list Centra’s digital tokens in an exchange. To this request, Sharma replied, “Don’t text me that shit lol. Delete.”
According to the criminal charges against Trapani, he “conspired with his co-defendants to lure investors with false claims about their product and about relationships they had with credible financial institutions.”
Deputy U.S. Attorney Robert Khuzam concluded that, “While investing in virtual currencies is legal, lying to deceive investors is not.”
The fact that SEC investigations into fraudulent ICOs are leading to arrests should serve as a cautionary tale for the numerous companies currently making wild claims about their cryptocurrency ventures. In the current ICO and cryptocurrency scenario, sound legal advice is key.
Trapani could face up to 20 years in prison.
Are you part of a team planning an ICO or plan to take investment in your cryptocurrency venture? Herskovits PLLC can help. As securities lawyers exclusively for more than two decades, we know the rules and realities of SEC requirements and how they apply in the new cryptocurrency landscape. 212.897.5410