Robert Farkas, founder of the crypto coin company Etoro, which raised more than $25 million in its initial coin offering (ICO) scheme, pleaded guilty in federal court in Manhattan on Tuesday.
The official statement accused Farkas of committing electronic and securities fraud and he was sentenced to 70 to 87 months and a fine of up to $250,000. The date of sentencing has not yet been determined.
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A company built on lies
Farkas launched the Miami-based company, along with two other “co-founders,” Sohrab Sharma and Raymond Trapani, whose trials will be held in November of this year.
The very foundation of Centra Tech was established on distorted facts and lies about the company’s founding members. The company promised to launch a “Centra Card” that could be used to pay in crypto-currencies to all merchants who accepted Visa or Mastercard. However, it was later discovered that they had never formed a partnership with either payment company.
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The founders also made false claims about the company’s non-existent CEO, “Michael Edwards”. They said Edwards was a Harvard University student 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 company staff members and about having a money transmitter license in 38 states, in order to trick investors into betting more money on their initial currency offering, or ICO.
Supported by well-known celebrities
Centra Tech’s ICO, held between July and October 2017, was supported by Floyd Mayweather and DJ Khaled.
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In 2018, the U.S. Securities and Exchange Commission (SEC) accused the two celebrities of illegally promoting digital currency offerings without disclosing to their supporters that they had been paid for it.
Mayweather, who has been involved with two other ICOs, ended up paying $300,000 in excess profits, a $300,000 fine and nearly $15,000 in pre-trial interest. DJ Khaled, on the other hand, had to pay $50,000, a $100,000 fine and nearly $3,000 in pretrial interest.