Floyd Mayweather, DJ Khaled Backed An ICO Whose Founders Have Been Arrested For $32M Fraud

Floyd Mayweather, DJ Khaled Backed An ICO Whose Founders Have Been Arrested For $32M Fraud

Cryptocurrency startup Centra Tech seemed to be a company on the rise, raising $32 million via an initial coin offering (ICO) which was touted by boxer Floyd Mayweather and DJ Khaled through paid endorsements.

Earlier this week, two of the startup’s founders were arrested. Sohrab “Sam” Sharma and Robert Farkas — who was trying to flee the country when he was detained — have been charged with perpetrating a fraudulent ICO by the Securities and Exchange Commission (SEC).  According to the SEC, Centra Tech raised millions of dollars by selling “unregistered securities.”

An ICO allows a company to issue a new digital coin in exchange for money. But Centra, according to the SEC, fleeced their investors.

Mayweather, who has not issued a public statement, has taken down references to Centra on his Instagram. Neither he nor DJ Khaled were named in the SEC filing.

“While the ICO startup claimed the funds would go toward developing financial products backed by Visa and Mastercard, the SEC said Centra had no relationship with either payment card network. The agency further stated that Sharma and Farkas created false marketing material, including fictional executives,” Coindesk reported.

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In a press release, SEC Division of Enforcement co-director Steve Peikin said: “As we allege, the defendants relied heavily on celebrity endorsements and social media to market their scheme. Endorsements and glossy marketing materials are no substitute for the SEC’s registration and disclosure requirements as well as diligence by investors.”

Not only did the founders pay celebrities to help promote the ICO, they also created fake executives.

“Michael Edwards’ was listed as the Chief Executive Officer and Co-Founder of Centra. Edwards’s LinkedIn profile stated that he had an M.B.A. from Harvard University and an extensive career in banking […] “Jessica Robinson” was listed as the Chief Financial Officer, who had purportedly most recently served as the CFO at Johnson Communications for nearly five years. Neither Edwards nor Robinson is a real person,” Gizmodo reported.

The SEC wants Centra to return the money it has raised to its investors.

The agency has been cracking down on ICOs as of late. “Initial coin offerings, or I.C.O.s, emerged suddenly last year to become one of the most popular ways for startups to raise money, with investors pouring more than $6 billion into such offerings. But I.C.O.s operate in a regulatory gray area, and that has drawn a swift blowback from authorities around the world,” the New York Times reported.

While the SEC is investigating other ICOs, the Centra founders “appear to have been the first people arrested because of a coin offering,” according to the Times.

Mayweather boasted in the past that he is going to make a ton of money in cryptocurrency from a different blockchain startup — Stox.com. He promoted the Aug. 2, 2017 ICO, garnering criticism and even speculation that he may be engaging in illegal activity.