The co-founder of the Centra Tech crypto project that at one time garnered A-list celebrity endorsements but was later called a scam in court, pleaded guilty Tuesday for conspiring to commit securities and wire fraud.
Robert Farkas, 33, admitted he and co-founders Sohrab Sharma and Raymond Trapani misrepresented Centra Tech’s true purpose as they worked to dupe investors out of more than $25 million, the Justice Department said in a press release.
The three pitched investors on a “Centra Card” crypto debit card purportedly issued by Visa or Mastercard, claimed to have 38 state money transmitter licenses and concocted a CEO who they said attended Harvard to bolster their credibility. Prosecutors said that none of those claims were true.
The three also got influential celebrities including boxer Floyd Mayweather and music producer DJ Khaled to promote Centra Tech’s initial coin offering (ICO) “Centra Tokens,” which ultimately raised $25 million from unwitting investors, prosecutors said.
(Mayweather and Khaled later settled with the U.S. Securities and Exchange Commission for failing to disclose their financial ties to Centra Tech. Neither admitted or denied guilt in that settlement and later evaded the civil suit.)
Farkas, Trapani and Sharma’s scheme ran from July through October 2017, but by December 2017 a project investor filed suit alleging that Centra Tech had violated securities laws when it raised over $30 million from the Centra Token ICO.
The SEC followed with an April 2018 lawsuit arguing much the same. It ordered Centra Tech to cease its ICO and alleged in court that the project was a multi-million dollar unregistered securities pumped by celebrity endorsements.
The founders of Centra Tech continued to face a mounting onslaught in the courts. In May 2018 they were indicted on federal charges of conspiracy and the commission of securities and wire fraud in the case that Farkas pleaded guilty to Tuesday.
In pleading guilty on two counts, Farkas could face a maximum of 10 years in prison.