When the SEC charged Centra’s co-founders Sam Sharma and Robert Farkas with running a “fraudulent ICO” earlier in the month, one mysterious co-founder was still at large, Raymond Trapani, the alleged “mastermind” of the operation.
In a scathing announcement the SEC have now charged Trapani, as well as expanding their list of allegations against Sharma and Farkas. Robert A. Cohen, who heads the SEC’s Enforcement Division’s Cyber Unit, says that the three men “ … went to great lengths to create the false impression that they had developed a viable, cutting-edge technology.”
In addition to their troubles with the SEC, the Centra team also face criminal charges brought by the U.S. Attorney’s Office for the Southern District of New York.
Manipulating Trade Price
According to the SEC’s complaint, the Centra ICO was fraudulent from top to bottom. There were “misrepresentations about the viability of the company’s core financial services products”, “fictional executive bios” and marketing boasts of “nonexistent business relationships with major credit card companies.”
As if that wasn’t enough, the SEC now allege that Trapani and Sharma engaged in trade manipulation of the CTR tokens “to generate interest in the company and prop up the price of the tokens”.
The SEC statement unveils further evidence of the trio’s bad faith by releasing text messages between the accused. On hearing that a bank had complained that Centra was claiming a false relationship in its its marketing materials, Sharma texted the others, “[w]e gotta get that s[***] removed everywhere and blame freelancers lol.”
Later, when the team was trying to get an exchange listing for CTR, Trapani apparently instructed Sharma to “cook me up” the necessary fake documents. Despite his earlier indiscretion, Sharma appeared to realise that having this kind of communication through text message was unwise, replying, “Don’t text me that s[***] lol. Delete.”
With this new complaint the SEC has doubled down on the punishments it is seeking for the accused. Not only is it looking for “permanent injunctions, the return of allegedly ill-gotten gains plus interest and penalties” it also seeks “bars against Trapani prohibiting him from serving as a public company officer or director” and, of course, “from participating in any offering of digital or other securities.”
The Centra case has caused a stir in the ICO world as for the first time the SEC has mentioned paid celebrity endorsements, potentially leaving the door open for prosecutions of “global brand ambassadors” who have promoted fraudulent ICOs.
Bizarrely, many CTR investors appeared to keep the faith even through the initial arrests. One Telegram user on the project’s Telegram channel, ‘FalconeDistrict’, stated that “ppl are laughing now and thinkign [sic] its stupid. but if everything goes smooth and fud fades, centra will 10x like nothing lol.” Another user, ‘Hassan’ claimed that, “when this turns out to be just fud, all you lots will be kicking yourself.”
“It is bizarre that some people continued to delude themselves that the project still had promise, even after the arrests,” said ‘Trundle’, another Telegram user. “That said, before the arrests, very few had any suspicions. It was one of the most sophisticated ICO scams that I’ve yet seen.”