SEC Charges Additional Defendant in Fraudulent ICO Scheme
SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 24117 / April 20, 2018
Securities and Exchange Commission v. Sohrab ("Sam") Sharma, et al., Civil Action No. 18-cv-2909 (S.D.N.Y.) (filed April 20, 2018)
The Securities and Exchange Commission today announced additional fraud charges stemming from an investigation of Centra Tech, Inc.'s $32 million initial coin offering.
In an amended complaint filed April 20, 2018, the SEC charged one of Centra's co-founders, Raymond Trapani, in a fraudulent scheme related to Centra's 2017 ICO, in which the company issued "CTR Tokens" to investors. Earlier this month, the SEC and criminal authorities charged Centra's two other co-founders, Sohrab "Sam" Sharma and Robert Farkas, for their roles in the scheme.
The SEC's amended complaint alleges that Trapani was a mastermind of Centra's fraudulent ICO, which Centra marketed with claims about nonexistent business relationships with major credit card companies, fictional executive bios, and misrepresentations about the viability of the company's core financial services products. The amended complaint further alleges that Trapani and Sharma manipulated trading in the CTR Tokens to generate interest in the company and prop up the price of the tokens.
Text messages among the defendants reveal their fraudulent intent. After receiving a cease-and-desist letter from a major bank directing him to remove any reference to the bank from Centra's marketing materials, Sharma texted to Farkas and Trapani: "[w]e gotta get that s[***] removed everywhere and blame freelancers lol." And, while trying to get the CTR Tokens listed on an exchange using phony credentials, Trapani texted Sharma to "cook me up" a false document, prompting Sharma to reply, "Don't text me that s[***] lol. Delete."
The SEC's amended complaint, filed in federal court in the Southern District of New York, charges Trapani with violating and aiding and abetting Centra's violations of Section 5(a), 5(c), and 17(a) of the Securities Act of 1933, and 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The amended complaint seeks permanent injunctions, the return of allegedly ill-gotten gains plus interest and penalties, as well as bars against Trapani prohibiting him from serving as a public company officer or director and from participating in any offering of digital or other securities. In a parallel action, the U.S. Attorney's Office for the Southern District of New York today announced criminal charges against Trapani.