Robert Farkas, one of the founders behind the Miami-based cryptocurrency firm Centra Tech has been sentenced to one year in prison for committing securities fraud.
Centra Tech’s False Claims
According to a press release by the U.S. Attorney’s Office, Farkas had pleaded guilty to fraudulently raising millions of dollars from investors by making false claims during a 2017 ICO.
Farkas misrepresented partnerships with financial companies like Visa and Mastercard in order to solicit funds from investors. Apart from fake business ties, the co-founders also claimed to hold a money transmitter license in 38 American states, and misrepresented the project’s team and its credentials.
Ilan T. Graff, Attorney for the United States, stated that Farkas and his accomplices “created fictitious executives and fabricated business relationships with legitimate institutions to dupe investors into handing over millions of dollars for a fraudulent ICO.”
Farkas’ sentence was announced in a Manhattan federal court. In addition to the one year prison sentence, Farkas was also sentenced to three years of supervised release and forced to forfeit approximately $347,000 and a Rolex watch bought with proceeds.
Before the Sentence
Centra Tech’s seemingly legitimate claims, which turned out to fraudulent, were successful in trapping many investors.
In an ICO in July 2017, Centra Tech raised more than 100,000 ETH (more than $25 million at the time) in exchange for Centra’s CTR tokens. In 2018, regulators were able to recover the funds when the U.S. Attorney’s Office and the Federal Bureau of Investigation seized 100,000 ETH from the firm.
The United States Marshals Service sold the seized ETH for about $33.4 million earlier this year. The proceeds will be used in a remission program to compensate victims of the Centra Tech scam.
At the time of writing this author held Cosmos (ATOM).