On Monday afternoon, news broke that the co-founders of Centra Token had been arrested.
The co-founders of the Centra initial coin offering were just arrested and the project is being taken down by the Securities and Exchange Commission.
According to their website, Centra is a “Prepaid Card to spend the digital assets.” Touting potential competition with the likes of VISA and Mastercard, the cryptocurrency had been backed by former five division world champion Floyd Mayweather and musician DJ Khaled.
In a press release that stormed across the wire late Monday evening, The U.S. Securities and Exchange committee halted the ICO and charged the creators of Centra with “orchestrating a fraudulent initial coin offering (ICO) that raised more than $32 million from thousands of investors last year.”
The agency has leveled fraud charges against co-founders Sohrab “Sam” Sharma and Robert Farkas for offering and selling unregulated securities under the call sign CTR. According to the press release:
Sharma and Farkas allegedly claimed that funds raised in the ICO would help build a suite of financial products. They claimed, for example, to offer a debit card backed by Visa and MasterCard that would allow users to instantly convert hard-to-spend cryptocurrencies into U.S. dollars or other legal tender. In reality, the SEC alleges, Centra had no relationships with Visa or MasterCard.
The price of CTR dropped significantly in the hours following the news.
No charges have been brought against Mayweather or DJ Khaled and their roles in the organization seem to be simply as paid hypemen for a project that was built on a mountain of lies.
The SEC has accused Farkas of creating fictional biographies that led investors to believe in the project. Farkas was arrested as he attempted to board a flight.
“We allege that Centra sold investors on the promise of new digital technologies by using a sophisticated marketing campaign to spin a web of lies about their supposed partnerships with legitimate businesses,” said Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement. “As the complaint alleges, these and other claims were simply false.”
With a sharper critical lens being placed on the cryptocurrency community, the wild west days of non-compliance may be a thing of the past.