Co-founder of cryptocurrency firm Centra Tech pleads guilty to fraud
Robert Farkas pleaded guilty to conspiring to commit securities and wire fraud in connection with a scheme to induce victims to invest more than $25 million dollars’ worth of digital funds in Centra Tech.
Robert Joseph Farkas, also known as “RJ,” pleaded guilty today to conspiring to commit securities and wire fraud in connection with a scheme to lure victims to invest more than $25 million dollars’ worth of digital funds in Centra Tech, Inc.
Farkas, a co-founder of Centra Tech, and his co-conspirators used material misrepresentations and omissions to solicit investors to purchase securities, in the form of digital tokens issued by Centra Tech, through an initial coin offering (ICO) beginning around July 2017.
According to the Superseding Information, and other filings and statements at public court proceedings in the case, in or about July 2017, Farkas, along with co-defendants Sohrab Sharma and Raymond Trapani, founded Centra Tech. The firm claimed to offer cryptocurrency-related financial products, including a purported debit card, the “Centra Card,” that supposedly allowed users to make purchases using cryptocurrency at establishments accepting Visa or Mastercard payment cards. From approximately July 30, 2017, through October 5, 2017, FARKAS and his co-defendants solicited investors to purchase unregistered securities, in the form of digital tokens issued by Centra Tech (“Centra tokens” or “CTR tokens”), through an ICO.
As part of this scheme, Farkas and the other co-defendants represented that Centra Tech had an experienced executive team with impressive credentials, including a purported CEO named “Michael Edwards” with more than 20 years of banking industry experience and a master’s degree in business administration from Harvard University, and that Centra Tech had formed partnerships with Bancorp, Visa, and Mastercard to issue Centra Cards licensed by Visa or Mastercard.
Based in part on these claims, victims provided millions of dollars’ worth of digital funds in investments for the purchase of Centra Tech tokens. In or about October 2017, at the end of Centra Tech’s ICO, those digital funds raised from victims were worth more than $25 million. At certain times in 2018, as the defendants’ fraud scheme was ongoing, those funds were worth more than $60 million.
The claims that FARKAS and his co-conspirators made to help secure these investments, however, were false. In reality, the purported CEO “Michael Edwards” and another supposed member of Centra Tech’s executive team were fictional people who were fabricated to dupe investors, and Centra Tech had no such partnerships with Bancorp, Visa, or Mastercard.
On or about May 2018 and October 2018, this Office and the Federal Bureau of Investigation (“FBI”) seized, pursuant to judicially authorized seizure warrants, 100,000 Ether units, consisting of digital funds raised from victims who purchased digital tokens issued by Centra Tech during its ICO based on fraudulent misrepresentations and omissions.
Farkas pleaded guilty to one count of securities fraud conspiracy and one count of wire fraud conspiracy, each of which carries a maximum sentence of five years in prison.
