SEC Halts Fraudulent Unregistered
Centra Tech ICO
April 3, 2018
The Securities and Exchange Commission charged two co-founders of a
purported financial services start-up with orchestrating a fraudulent
initial coin offering (ICO) that raised more than $32 million from
thousands of investors last year. Criminal authorities separately
charged and arrested both defendants.
The SEC's complaint alleges that Sohrab “Sam”¯ Sharma and Robert Farkas,
co-founders of Centra Tech. Inc., masterminded a fraudulent ICO in which
Centra offered and sold unregistered investments through a "CTR Token."¯
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 SEC also alleges that to
promote the ICO, Sharma and Farkas created fictional executives with
impressive biographies, posted false or misleading marketing materials
to Centra’s website, and paid celebrities to tout the ICO on social
According to the complaint, Farkas made flight reservations to leave the
country, but was arrested before he was able to board his flight.
Criminal authorities also arrested Sharma.
"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
"As we allege, the defendants relied heavily on celebrity endorsements
and social media to market their scheme,”¯ said Steve Peikin,
Co-Director of the SEC's Division of Enforcement. “Endorsements and
glossy marketing materials are no substitute for the SEC’s registration
and disclosure requirements as well as diligence by investors.”
SEC’s complaint, filed in federal court in the Southern District of New
York, charges Sharma and Farkas with violating the anti-fraud and
registration provisions of the federal securities laws. The complaint
seeks permanent injunctions, return of allegedly ill-gotten gains plus
interest and penalties, as well as bars against Sharma and Farkas
serving as public company officers or directors 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 Sharma and Farkas.
The SEC's investigation, which is continuing, is being conducted by Jon
A. Daniels, Luke M. Fitzgerald, and Alison R. Levine of the SEC's Cyber
Unit and New York Regional Office, and supervised by Valerie A.
Szczepanik and Robert A. Cohen. The litigation is being conducted by Mr.
Daniels, Mr. Fitzgerald, and Ms. Levine, and supervised by Ms.
Szczepanik. The SEC appreciates the assistance of the U.S. Attorney’s
Office for the Southern District of New York, the Federal Bureau of
Investigation, and the Financial Industry Regulatory Authority.