US authorities have arrested two co-founders of an initial coin offering, which was promoted by boxer Floyd Mayweather, and charged them with fraud.
Robert Farkas, 31, and Sohrab “Sam” Sharma, 26, who are founders of Centra Tech, were charged in connection with their $32-million, initial coin offering last year.
The New York Times is reporting that a third man, Raymond Trapani, also listed as a Centra co-founder, has not been charged.
Farkas and Sharma will now face criminal charges that center on their plans to sell a digital token that, according to the US Securities and Exchange Commission (SEC) and Justice Department, did not comply with federal securities laws. The authorities say the scheme’s claims, to be backed by Visa and MasterCard and to easily allow users to convert crypto-assets into US dollars or other currencies, were a “web of lies.”
Mayweather was signed to promote the coin’s ICO to his eight million Twitter followers. “Centra’s ICO starts in a few hours,” tweeted the undefeated boxing champion last September. “Get yours before they sell out, I got mine.” But the boxing champ has not been accused of any wrongdoing.
Authorities said Farkas was arrested as he planned to board a plane to leave the US on Monday. The pair has been charged under a criminal complaint in Manhattan federal court. They stand accused of conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud and wire fraud.
In recent months the SEC has repeatedly warned investors about the investment and fraud risks associated with ICOs. It now classifies most of these offerings as securities, which means they must be registered to comply with federal law.