Robert Farkas, the founder of cryptocurrency firm Centra Tech, which raised more than $25 million from its initial coin offering scam, pled guilty in a federal court in Manhattan on Tuesday. 

The official statement accused Farkas of conspiring to commit securities and wire fraud and ordered a sentence between 70 to 87 months and a fine up to $250,000. The date of the sentence is yet to be determined.

A company built on lies

Farkas launched the Miami-based company along with two other “co-founders,” Sohrab Sharma and Raymond Trapani, whose trials are due in November this year.

The very foundation of Centra Tech was based upon misrepresented facts and lies about the company’s core team members. The company promised to launch a “Centra Card” that could be used to pay in cryptocurrencies to all merchants accepting Visa or Mastercard payment cards. However, it was later found that they had never formed a partnership or licensed with either of the two payment companies.

The founders also made false claims about the company’s nonexistent CEO “Michael Edwards.” They said Edwards was an alumnus of Harvard University with a master’s degree in business administration and had more than 20 years of experience in the banking industry. They also lied about other team members of the company and about having a money transmitter license in 38 states so as to dupe investors into betting more money on their initial coin offering, or ICO.

Backed by well-known celebrities

The Centra Tech ICO, which was held between July and October 2017, was backed by Floyd Mayweather and DJ Khaled. 

In 2018, the United States Securities and Exchange Commission charged both celebrities for unlawfully promoting crypto coin offerings without revealing to their followers that they had been paid to do so. 

Mayweather, who was involved with two other ICOs, ended up paying $300,000 in disgorgement, a $300,000 penalty and nearly $15,000 in prejudgment interest. DJ Khaled, on the other hand, had to pay $50,000, a $100,000 penalty, and nearly $3,000 in prejudgment interest.