Boxer-Backed Cryptocurrency Charged With Fraud

Floyd Mayweather knows when to pick a fight, but perhaps not when to back a cryptocurrency. The champion boxer touted a company called Centra on social media as recently as September 2017. Now, a CNBC report indicates that two founders of the cryptocurrency-based company have been arrested on charges related to a fraudulent initial coin offering (ICO). The U.S. Securities and Exchange Commission (SEC) has charged Sohrab "Sam" Sharma and Robert Farkas, co-founders of Centra Tech., Inc. with the crime.

Centra Earned $32 Million in ICO

Centra launched via ICO, earning $32 million via crowdfunding efforts, propelled by celebrity endorsements by Mayweather and others. Sharma and Farkas claimed to offer a debit card which was backed by Visa and Mastercard and which would allow holders to convert cryptocurrencies to U.S. dollars for practical spending purposes. The SEC, on the other hand, alleges that Centra did not have a relationship with either Visa or Mastercard, and that Sharma and Farkas had in fact fabricated biographies of executives in order to lend their company greater clout. The allegations even include paying celebrities to hawk the ICO on social media, according to the charges. The ICO itself was allegedly fraudulent, with Centra selling unregistered investments through its so-called "CTR token."

"Web of Lies"

The SEC's Stephanie Avakian, co-director of the Division of Enforcement, said in a statement that the agency "allege[s] that Centra sold investors on the promise of new digital technologies by using a sophisticated marketing campaign to spin a web of lies about their supposed partnerships with legitimate businesses. As the complaint alleges, these and other claims were simply false."

The complaint was filed in federal court in the Southern District of New York and formally charges the two co-founders with violations of anti-fraud laws, as well as registration provisions of securities laws. The complaint seeks permanent injunctions as well as the return of the allegedly stolen funds, including interest and penalties. The two individuals would further be banned from any future ICO or securities offerings. Centra is the latest ICO that the SEC has taken down; it took action against a company called AriseBank earlier this year.

Floyd Mayweather has yet to issue a statement regarding the Centra debacle.

Investing in cryptocurrencies and Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns bitcoin and ripple.