The press release by the U.S Securities and Exchange Commission (SEC) on 2nd April concerns cryptocurrency – however, there is nothing cryptic about it.
The notice, titled “SEC Halts Fraudulent Scheme Involving Unregistered ICO”, dives into full detail about Centra Tech Inc’s fraudulent initial coin offering (ICO) which is endorsed by the boxing champion Floyd “Money” Mayweather.
The announcement starts by saying that the SEC “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” while not neglecting the information that criminal authorities have also charged and arrested the offenders.
The company’s co-founder’s Robert Farkas and Sohrah ‘Sam’ Sharma are being indicted for having “masterminded a fraudulent ICO in which Centra offered and sold unregistered investments through a “CTR Token.”
Apparently, the two offered that the funds collected in the ICO would be used to “help build a suite of financial products.” What is apparent is not the financial products of Centra Tech but the assertions the SEC have made in the case against the owners, saying that the pair were offering debit cards which were backed by Visa and Mastercard in order to allow users to immediately convert cryptos into U.S dollars or other fiat tender. All the while there was no link between the company and Visa and MasterCard and the project was an innovative marketing scheme with no valid technological merit.
The SEC also outlined that the ICO was promoted in an underhanded way, through use of imaginary executives with fantastic biographies as well as misleading advertising tactics on the company’s website. It was also alleged that Centra paid celebrities to peddle the ICO to gain the A-Lister reputation.
Particularly striking, however, is that this was not hidden knowledge. In an article in the New York times last year October, the lack of cryptocurrency experience behind Centra’s founding team was charted and the issues surrounding the fraudulent behavior already documented.
The terms ‘ICO’ and ‘risk’ seem to go hand-in-hand and this case gives further reason why investors should be careful that they are not putting their money straight into the pockets of scammers, even if the project holds the support of icons and popular figures.
With the possibility of this scandal dragging his name through the digital currency dirt, Money Mayweather – or rather Crypto Mayweather – may be questioning whether backing this token will have muddied his cryptoreputation for good.