The Securities and Exchange Commission has obtained final judgments on consent against Sohrab “Sam” Sharma, Robert Farkas, and Raymond Trapani in regards to Centra Tech and an initial coin offering (ICO) deemed to be an unregistered security by the SEC.
The SEC states that Centra Tech issued CTR Tokens raising over $32 million from investors. The Centra ICO gained additional notoriety due to the touting of the offerings from “influencers” – once a common practice in the ICO sector. These influencers, including DJ Khaled and Floyd Mayweather, were able to avoid direct liability but had to disgorge payments while paying a penalty.
The SEC’s amended complaint was originally filed April 20, 2018, and is just one among many enforcement actions the SEC has pursued in recent years. The SEC’s complaint claims that the creators made “numerous material misrepresentations in marketing the CTR tokens, including touting Centra’s claimed partnerships with Visa, MasterCard, and The Bancorp.” The SEC added that, 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. Sharma, Trapani, and Farkas have each pleaded guilty and have been sentenced to a term of imprisonment, according to the SEC.
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 SEC states that the judgments enjoin each from violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5, 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.