SEC Obtains Final Judgments Against Defendants in Fraudulent ICO Scheme
Litigation Release No. 25396 / May 19, 2022
Securities and Exchange Commission v. Sohrab ("Sam") Sharma, et al., Civil Action No. 18-cv-02909 (S.D.N.Y. filed April 20, 2018)
The Securities and Exchange Commission announced today that it obtained final judgments on consent against Sohrab "Sam" Sharma, Robert Farkas, and Raymond Trapani. In April 2018, the SEC charged Sharma, Farkas, and Trapani with conducting a fraudulent and unregistered initial coin offering through Centra Tech Inc., an entity they controlled, that raised over $32 million by selling "CTR tokens" to investors.
According to the SEC's amended complaint, filed April 20, 2018, Sharma, Farkas, and Trapani made numerous material misrepresentations in marketing the CTR tokens, including touting Centra's claimed partnerships with Visa, MasterCard, and The Bancorp, when in fact, Centra did not have any "partnership" or any relationship with these institutions. The amended complaint further alleges that Defendants created fictitious executive bios, made misrepresentations about the viability of the company's core financial services products, and manipulated trading in the CTR Tokens to generate interest in the company and prop up the price of the tokens.
In April 2018, the United States Attorney's Office for the Southern District of New York brought criminal charges against Sharma, Trapani and Farkas for their roles in the fraudulent Centra ICO in United States v. Sharma et al, 18-Cr. 340 (S.D.N.Y.) (LGS). Sharma, Trapani, and Farkas have each pleaded guilty and have been sentenced to a term of imprisonment.
On May 17, 2022, the U.S. District Court for the Southern District of New York entered final judgments on consent against Sharma, Trapani, and Farkas. The judgments enjoin each from violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, and the registration provisions of Section 5 of the Securities Act. The judgments also order: (1) disgorgement, including prejudgment interest of $37,701,966, $2,608,869, and $394,908 against Sharma, Trapani and Farkas respectively, each of which was deemed satisfied by the orders of forfeiture entered in the parallel criminal proceeding against each of them; (2) officer-and-director bars; and (3) permanent injunctions from conducting any offering of digital asset securities or other securities.
The SEC's litigation was conducted by Alison R. Levine and Jon A. Daniels of the Crypto Assets and Cyber Unit and Luke M. Fitzgerald of the Asset Management Unit. The case was supervised by Mark R. Sylvester and A. Kristina Littman of the Crypto Assets and Cyber Unit and Lara S. Mehraban of the New York Regional Office.