Cryptocurrency Fraudster Lured Victims To Phony Company


Cryptocurrency Fraudster Lured Victims to Phony Company 1

Ilan T. Graff, Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that SOHRAB SHARMA, a/k/a “Sam Sharma,” pled guilty today before U.S. Magistrate Judge Robert W. Lehrburger to conspiring to commit securities fraud, wire fraud, and mail fraud in connection with a scheme to induce victims to invest more than $25 million dollars’ worth of digital funds in Centra Tech, Inc. (“Centra Tech”), a Miami-based company he co-founded and which purported to offer cryptocurrency-related financial products. 

SHARMA, a leader of the scheme, 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, among other means, an initial coin offering (“ICO”) beginning in approximately July 2017.  In connection with his plea agreement, SHARMA has also agreed to forfeit 100,000 Ether units, consisting of digital funds raised from victims who purchased digital tokens issued by Centra Tech based on fraudulent misrepresentations and omissions.

Mr. Graff said:  “As he has now admitted, Sharma and his co-conspirators lured victims into investing digital currencies worth millions of dollars based on false claims about their company and its purported products.  Sharma and his co-conspirators concocted a fake CEO, fake partnerships, and fake licenses.  Fraud is fraud, whether it occurs in digital securities markets or over traditional exchanges, and Sharma now faces a federal sentence for his role in this fraudulent scheme.”

According to the Superseding Information, and other filings and statements at public court proceedings in the case:

In or about July 2017, SHARMA, along with co-defendants Raymond Trapani and Robert Farkas, founded a company called Centra Tech that 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 2017 through October 2017, SHARMA 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, among other means, a so-called “initial coin offering” or “ICO.”  As part of their fundraising efforts, SHARMA and his co-defendants in oral and written offering materials that were disseminated via the internet, represented: (a) 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, (b) that Centra Tech had formed partnerships with Bancorp, Visa, and Mastercard to issue Centra Cards licensed by Visa or Mastercard, and (c) that Centra Tech had money transmitter and other licenses in 38 states, among other claims.  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 fundraising efforts, 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 SHARMA and his co-conspirators made to help secure these investments, however, were false.  In fact, the purported CEO “Michael Edwards” and another supposed member of Centra Tech’s executive team were fictional people who were fabricated to dupe investors, Centra Tech had no such partnerships with Bancorp, Visa, or Mastercard, and Centra Tech did not have such licenses in a number of those states.

SHARMA and his co-defendants were well aware of the falsity of such claims.  For example, with respect to Centra Tech’s purported CEO “Michael Edwards,” SHARMA text messaged Trapani and Farkas on or about July 29, 2017, that they “Need to find someone who looks like Michael,” “Team photos,” “He’s real lol,” “Everyone real,” “Except Jessica,” “And Mike.”  Similarly, SHARMA later wrote during that same exchange:  “Gonna kill both Ceo and her,” “Gonna say they were married and got into an accident.” 

With respect to Centra Tech’s purported partnerships with Bancorp, Visa, and Mastercard, SHARMA engaged in a cellphone text message conversation with Trapani and Farkas on or about July 31, 2017, in which they discussed Centra Tech’s lack of actual partnerships with banks or credit card companies.  Similarly, on or about September 29, 2017 –  the date on which the United States Securities and Exchange Commission (the “SEC”) announced that it filed a civil complaint charging a company, among others, with defrauding investors in an unregistered offering of securities styled as an initial coin offering – SHARMA asked via a group text message conversation with Trapani and Farkas that they remove certain materials from Centra Tech’s website that contained “fufu,” or fake information, about Centra Tech’s purported relationship with Visa because, according to SHARMA, “I rather cut any fufu,” “Off right own,” “Now,” “Then worry,” “Anything that doesn’t exist current,” “We need to remove.”  Later that day, SHARMA text messaged Trapani and Farkas:  “I want a product page like [another company],” “Theirs is so nice.”  Trapani wrote “Lol yeah no real product,” to which SHARMA responded “Yea but it doesn’t say much,” “And looks good,” “We don’t have a real product either right now,” “So I wanna tighten up ship asap.”

            With respect to Centra Tech’s purported money transmitter and other licenses in 38 states, SHARMA had a text message conversation with Trapani and Farkas on or about August 30, 2017, about applying for state licenses that Centra Tech had previously represented it already held in 38 states.  For example, SHARMA wrote in one message on or about August 30, 2017, to Trapani and Farkas:  “Gotta apply for all licenses,” “Should I even say this.”

            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 based on fraudulent misrepresentations and omissions. 

*                *                *

            SHARMA, 29, pled guilty to one count of conspiracy to commit securities fraud, one count of conspiracy to commit wire fraud, and one count of conspiracy to commit mail fraud, each of which carries a maximum sentence of five years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  SHARMA will be sentenced by U.S. District Judge Lorna G. Schofield on a date to be determined.

            Mr. Graff praised the work of the FBI, and thanked the SEC for its assistance.

            This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant United States Attorneys Samson Enzer, Negar Tekeei, and Daniel Loss are in charge of the prosecution.



Source link