Leading Co-Founder Of Cryptocurrency Company Sentenced To 8 Years In Prison For ICO Fraud Scheme
Ilan T. Graff, the Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that SOHRAB SHARMA, a/k/a “Sam Sharma” was sentenced today to eight years in prison in connection with his leading role in a scheme to induce victims to invest more than $25 million worth of digital funds in Centra Tech, Inc. (“Centra Tech”), a Miami-based company he co-founded and that purported to offer cryptocurrency-related financial products. SHARMA previously pled guilty to conspiring to commit securities fraud, wire fraud, and mail fraud in connection with his and his co-conspirators’ use of material misrepresentations and omissions to solicit investors to purchase securities, in the form of digital tokens issued by Centra Tech, through fraudulent fundraising efforts that included an initial coin offering (“ICO”) beginning in approximately July 2017. U.S. District Judge Lorna G. Schofield imposed the sentence in Manhattan federal court.
Mr. Graff said: “Sohrab Sharma led a scheme to deceive investors by falsely claiming that the start-up he co-founded had developed fully functioning, cutting-edge cryptocurrency-related financial products. In reality, Sharma’s most notable inventions were the fake executives, fake business partnerships, and fake licenses that he and his co-conspirators touted to trick victims into handing over tens of millions of dollars. We will continue to aggressively pursue digital securities frauds like this one.”
According to statements in the Superseding Information, and other filings and statements at public court proceedings in the case:
In or about July 2017, SHARMA, along with codefendants Robert Farkas and Raymond Trapani, 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 30, 2017, through October 5, 2017, SHARMA and his codefendants solicited investors to purchase unregistered securities, in the form of digital tokens issued by Centra Tech (“Centra tokens” or “CTR tokens”), including through a so-called “initial coin offering” or “ICO.” As part of this effort, SHARMA and his codefendants represented, in oral and written offering materials that were disseminated via the internet: (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 the defendants’ 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.
In 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 during its fundraising efforts based on fraudulent misrepresentations and omissions. The United States Marshals Service sold the seized Ether units for approximately $33.4 million earlier this year. Following entry of a final order of forfeiture, these funds and other forfeited fraud proceeds will be available for potential use in a remission program that the Department of Justice intends to create to compensate victims of the Centra Tech fraud.
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In addition to the prison term, SHARMA, 29, of Aventura, Florida, was also sentenced to three years of supervised release and ordered to pay a fine of $20,000. He was further ordered to forfeit $36,088,960.
Mr. Graff praised the investigative work of the FBI and thanked the U.S. Securities and Exchange Commission 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.