Co-Founders of Centra Indicted for Fraud

ICO is a new means how companies can generate funds for their venture. Today, there is a debate whether or not to consider ICOs as security. In fact, in some countries such as China, there is already a ban on ICOs. Apart from countries, you also have Facebook and Google that banned ICO advertisements in their respective platforms.

Numbers Don’t Lie

However, despite the regulations that can hamper ICOs, there is a steady growth in the amount of money raised using ICOs over the years. For instance, a report from IdentityMind Global disclosed that more than $6 billion was raised using ICOs in 2017 which is up from just $10 million in 2014 when ICOs started. However, during the first quarter of 2018, despite regulatory changes, ICO volume is already at $6.3 billion.

According to Garret Gafke, the CEO of IdentityMind Global, “Looking out over the remainder of 2018, I anticipate continued robust ICO market growth coming with increased regulatory scrutiny”. He added that “Previously, there was an emphasis on utility-based tokens but we are now seeing a movement toward securities-based ICOs. We also expect that the Securities and Exchange Commission (SEC) and Financial Crimes Enforcement Network (FinCEN) will increase their examination of ICOs and take actions against those not following US regulations”.

Celebrity Endorsed ICOs

There are also those ICOs that make use of celebrities in order to broaden their reach. Unfortunately, there are those that are considered scams. Two celebrities who had tainted their reputation in a fraudulent ICO include both Floyd Mayweather and DJ Khaled.

Floyd Mayweather may be the highest paid boxer in history, but this doesn’t mean that he is also the pound-for-pound authority in crypto space. Both DJ Khaled and Mayweather endorsed Centra, an ICO that aims to combine a blockchain wallet and a prepaid card service that allows users to spend their cryptos on various products. Centra was able to raise $32 million during the ICO.

Unfortunately, three co-founders of the crypto startup Centra Tech have now been formally indicted according to a statement from the US Department of Justice.

They are facing four-count indictment issued by the US District Court in Manhattan. The three co-founders include Sohrab Sharma, Robert Farkas, and Raymond Trapani. They are being charged with allegations of securities fraud, wire fraud, and two conspiracy counts.

The ICO raised $32 million from investors in 2017 claiming that their company had already partnered with Visa MasterCard in order to issue the virtual currency debit cards.

US Securities and Exchange Commissioner Robert Jackson mentioned last month that investors “are having a hard time telling the difference between investment and fraud”. And for this reason, could it be a possibility that even celebrities who endorsed a fraudulent ICO can also be in trouble?

ICOs are growing in popularity not only to raise funds but to also invigorate old companies. However, celebrity endorsements such as that of Centra can pose dangers to investors especially those who don’t do a bit of research about the company that they are going to support via ICO.