The founder of $25 million ICO scam that banked on celebrity promotion to lure investors will be spending a year behind bars. Robert Farkas, the founder of Centra Tech, will also have to forfeit $347,000 he gained from his fraudulent operation.
U.S. District Judge Lorna Schofield imposed the sentence in a Manhattan court on December 15, a press release by the Department of Justice revealed. As itreported in November, U.S. prosecutors have been pushing for a tough sentence for the 34-year-old Florida resident. In their sentencing memorandum, the prosecutors told the court that a tough sentence would “promote general deterrence and promote respect for the law.”
After pleading guilty to conspiring to commit securities fraud and wire fraud, Farkas stood up to ten years behind bars. However, the Southern District of New York has reduced the sentencing to just one year and one day in prison. In addition, the court sentenced him to three years of supervised release. He will also have to forfeit $347,062.58 and a Rolex watch he purchased with fraud proceeds.
Ilan Graff, the Attorney of the United States, cautioned other digital token issuers against thinking they are exempt from adhering to securities laws, just because they deal with digital securities.
He stated, “Farkas and his co-conspirators created fictitious executives and fabricated business relationships with legitimate institutions to dupe investors into handing over millions of dollars for a fraudulent ICO. We will continue to aggressively pursue frauds like this one, whether they involve traditional securities or newer financial instruments and crypto-assets.”
Graff also commended the U.S. Securities and Exchange Commission (SEC) which has been unwavering in its pursuit of Farkas and his co-conspirators.
Farkas, who went by his alias RJ, pleaded guilty to two counts of fraud in June. A month later, his co-conspirator Sohrab Sharma pleaded guilty as well, as did the third co-founder, Raymond Trapani. The three founded Centra Tech in 2017, riding on the ICO hype to raise $25 million from their investors. They claimed to be working on a debit card that would pioneer the retail use of digital currencies. They also lied about partnerships with other companies including Visa and about obtaining money transmitter licenses.
The Centra Tech scam was one that brought to light the use of celebrity endorsements to lure unsuspecting investors. It enlisted music producer DJ Khaled and boxing champion Floyd Mayweather to give it credibility. Other celebrities who have endorsed scam ICOs include comedian Kevin Hart, rapper T.I and actor Steven Seagal.