Government Recovers Digital Funds Worth More Than $60 Million
Robert Khuzami, Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that a grand jury in the Southern District of New York has returned an Indictment charging SOHRAB SHARMA, a/k/a “Sam Sharma,” RAYMOND TRAPANI, a/k/a “Ray,” and ROBERT FARKAS, a/k/a “RJ,” a/k/a “Bob,” the three co-founders of a startup company called Centra Tech, Inc. (“Centra Tech”), that purported to offer cryptocurrency-related financial products, with conspiring to commit, and the commission of, securities and wire fraud in connection with a scheme to induce victims to invest millions of dollars’ worth of digital funds for the purchase of unregistered securities, in the form of digital currency tokens issued by Centra Tech, through material misrepresentations and omissions. SHARMA, TRAPANI, and FARKAS were all arrested last month based on criminal complaints filed by this Office charging them with the same crimes.
Following their arrests, this Office and the Federal Bureau of Investigation (“FBI”) seized 91,000 Ether units, consisting of digital funds raised from victims as part of the charged scheme. This seized digital currency is presently worth more than $60 million. The case has been assigned to United States District Judge Lorna G. Schofield.
Mr. Khuzami said: “As alleged, the defendants conspired to capitalize on investor interest in the burgeoning cryptocurrency market. They allegedly made false claims about their product and about relationships they had with credible financial institutions, even creating a fictitious Centra Tech CEO. Whether traditional or cutting-edge, investment vehicles can’t legally be peddled with falsehoods and lies.”
According to the allegations in the Indictment filed in this case, the criminal complaints previously unsealed in this case, and in other filings and statements at public court proceedings in the case:
After SHARMA and TRAPANI worked together at a luxury car rental company in Florida called “Miami Exotics,” they and FARKAS co-founded a startup company called Centra Tech that claimed to offer cryptocurrency-related financial productions, including a purported debit card, the “Centra Card,” that supposedly allowed users to spend various types of cryptocurrency to make purchases at any establishment that accepts Visa or Mastercard payment cards. In approximately July 2017, SHARMA, TRAPANI, and FARKAS began soliciting investors to purchase unregistered securities, in the form of digital tokens issued by Centra Tech, through a so-called “initial coin offering” or “ICO.” As part of this effort, SHARMA, TRAPANI, and FARKAS, 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 ICO, those digital funds raised from victims were worth more than $25 million. Due to appreciation in the value of those digital funds raised from victims, those digital funds are presently worth more than $60 million.
The representations that SHARMA, TRAPANI, and FARKAS 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 are fictitious 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, TRAPANI, and FARKAS were well aware of the falsity of such claims. For example, with respect to Centra Tech’s purported partnerships with Bancorp, Visa, and Mastercard, SHARMA engaged in a cellphone text message conversation with TRAPANI on or about July 31, 2017, in which they discussed Centra Tech’s lack of actual partnerships with banks or credit card companies. During that exchange, SHARMA wrote: “Should write down a list of places to call tomorrow,” “For the conbranded [sic] card.” Later in the exchange, SHARMA wrote: “Gotta get it going on the banks today plz.” SHARMA also subsequently wrote: “We just need to get s [sic] banking license,” “Need our direct agreement with visa,” “Or MasterCard,” “That’s the move,” “Cut out the middle man,” “I wish we just knew someone.”
With respect to Centra Tech’s purported CEO “Michael Edwards,” SHARMA text-messaged TRAPANI 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.”
Finally, 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 2, 2018, this Office and the FBI seized, pursuant to a judicially authorized seizure warrant, 91,000 Ether units, consisting of digital funds raised from victims who purchased digital tokens issued by Centra Tech during its ICO based on fraudulent misrepresentations and omissions. The seized funds are presently worth more than $60 million.
In a separate action, the United States Securities and Exchange Commission (the “SEC”) has filed civil charges against SHARMA, TRAPANI, and FARKAS.
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SHARMA, 27, TRAPANI, 27, and FARKAS, 31, are all residents of Florida. All three of them are charged in a four-count Indictment with one count of conspiracy to commit securities fraud, which carries a maximum potential sentence of five years in prison; one count of conspiracy to commit wire fraud, which carries a maximum potential sentence of 20 years in prison; one count of securities fraud, which carries a maximum potential sentence of 20 years in prison; and one count of wire fraud, which carries a maximum potential sentence of 20 years in prison. In addition to potential prison sentences, each of these charges also carries potential financial penalties. The maximum potential prison sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Khuzami praised the work of the FBI and thanked the SEC for its assistance. Mr. Khuzami also thanked the Department of Homeland Security, Homeland Security Investigations (“DHS-HIS”) and the District Attorney’s Office for New York County for their assistance in this case.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Samson Enzer and Negar Tekeei are in charge of the prosecution. Assistant United States Attorney Daniel Tracer is in charge of the forfeiture aspects of the case.
The allegations contained in the charging documents in this case are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
 As the introductory phrase signifies, the entirety of the text of the Complaints and the Indictment, and the description of the Complaints and the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.