Cryptocurrency startup Centra Tech co-founder Robert Farkas, on June 16, pled guilty to conspiring securities and wire fraud. He admitted to duping his investors into investing more than $25 million dollars’ worth of digital funds into his Miami-based company Centra Tech. On Tuesday, 33-year-old Farkas appeared over the phone before the U.S. Magistrate Judge James Cott in federal court in Manhattan. Robert Farkas now faces ten years in prison after admitting to committed the two frauds – on for securities fraud conspiracy and another for wire fraud conspiracy. Each of the counts of fraud carries a maximum sentence of five years in prison
Centra Tech Inc was founded by Robert Farkas in 2017 in partnership with Sohrab Sharma and Raymond Trapani. The other two co-founders are also defendants in the lawsuit. According to the US Federal Bureau of Investigation, Centra Tech was running a massive fraudulent scheme. While Farkas appeared before the federal court on Tuesday, Sharma and Trapani are slated to go to trial in November.
As per media reports, the company raised over $32 million in an ICO (initial coin offering) by misleading investors and lying to them, which notedly went on till at least nine months. In 2018, Farkas and two other Centra Tech co-founders were charged with misleading ICO investors by making fictitious claims about their company and misrepresentation in digital technologies.
Reportedly, the company employed celebrities such as music producer DJ Khaled and boxing champion Floyd Mayweather to lure its investors and made claims such as its Centra Card could be used to make payments via digital currency as VISA and Mastercard terminals. The founders told the investors that they have collaborated with VISA, Mastercard, and Bancorp which allowed the company to issue the ‘Centra Card’ for digital currency transactions. However, there was no such partnership in reality.
According to the Department of Justice, the three founders also lied about their company’s leadership to the investors making them believe that a ‘Michael Edwards’ is the CEO of Centra Tech Inc. But, he never existed.
“Farkas and his co-conspirators duped ICO investors into investing digital currency worth millions of dollars based on fictitious claims about their company, including misrepresentations relating to its purported digital technologies and its relationships with legitimate businesses in the financial services sector,” said United States attorney Craig Stewart in a statement.
The Department of Justice also stated that the FBI has recovered 100,000 Ethereum between May and October 2018 from the company which also included funds raised from investors fraudulently. According to a Bloomberg report, Farkas has agreed to a plea agreement that calls for a sentence between 70 and 87 months and a fine up to $250,000.