Founders Of Mayweather And DJ Khaled-Backed ICO Charged By SEC

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    The U.S. Securities and Exchange Commission has charged founders of an Initial Coin Offering known as Centra (CTR) with fraud. According to the markets regulator the two, Robert Farkas and Sohrab Sharma, used intricate marketing campaigns such as paid endorsements involving celebrities such as singer DJ Khaled and boxer Floyd Mayweather to raise approximately $32 million.

    “We allege that Centra [Tech] 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,” Securities and Exchange Commission’s enforcement division co-director, Stephanie Avakian, said.

    Debit card

    Some of the false claims that Robert Farkas and Sohrab Sharma made include the fact that they had formed a partnership with financial services firms MasterCard and Visa to introduce a debit card which would allow users to spend their CTRs or convert them into fiat currencies. According to the Securities and Exchange Commission such a partnership never existed.

    The alleged Centra fraud is understood to have impacted thousands of investors. Last year in December a class action suit was filed against Centra. In the suit neither DJ Khaled nor Mayweather were named as co-defendants though they were referred to as managing partner and official brand ambassador of the firm. Following the controversy Mayweather has taken down the posts on his social media accounts that are connected to the Initial Coin Offering.

    Anti-touting provisions

    The Securities and Exchange Commission has however issued a warning to celebrities telling them that they could be in violation of securities since they have promoted an Initial Coin Offering without revealing the amount and nature of their compensation. In November last year the U.S. Securities and Exchange Commission said failing to disclose this amounted to violating the anti-touting provisions contained in the securities laws.

    The warning was issued by the SEC following a move by a couple of prominent celebrities to tout Initial Coin Offerings that were less well-known last year. Besides Centra Mayweather has also touted Stox and Hubii Network, projects which only had websites and ICO plans. Another celebrity who endorsed an Initial Coin Offering was Paris Hilton as she touted Lydian Coin (LDN).

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