Guilty plea in crypto firm fraud

The co-founder of a cryptocurrency firm has pled guilty to two charges in connection with an initial coin offering (ICO) that raised more than US$25 million from investors based on a series of false claims.

The U.S. Attorney’s Office for the Southern District of New York said that Robert Joseph Farkas, 33, pled to one count of securities fraud conspiracy and one count of wire fraud conspiracy for his role in inducing investors to invest in his firm, Centra Tech Inc., which purported to offer crypto-related financial products.

In raising funds for the firm’s ICO, U.S. authorities alleged that Farkas and his co-conspirators “used material misrepresentations and omissions to solicit investors” to purchase digital tokens issued by Centra Tech.

According to U.S. authorities, investors were told that the firm was headed by a banking industry veteran with an MBA from Harvard, that the firm had partnerships with Visa Inc. and Mastercard Inc. to issue Centra Cards, and that it had licenses to operate in 38 states, among other claims.

However, authorities said, the purported CEO did not exist, but was “fabricated to dupe investors” and other claims were false.

“Farkas and his co-conspirators duped ICO investors into investing digital currency worth millions of dollars based on fictitious claims about their company, including misrepresentations relating to its purported digital technologies and its relationships with legitimate businesses in the financial services sector,” said Craig Stewart, U.S. attorney in the case.

“Whether in the context of traditional equity IPOs or newer cryptocurrency-related ICOs, raising capital through lies and deceit is a crime,” Stewart added.

Farkas will be sentenced on a date that has yet to be determined.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.