The US Securities and Exchange Commission (SEC) has stopped the Centra Tech ICO that raised $32 million a year ago by offering unregistered securities and captured its founders Sohrab Sharma and Robert Farkas by charging them for “orchestrating a fraudulent initial coin offering”.
SEC further alleged that the ICO was conducted with the claim to build financial products. A debit card backed by Mastercard and Visa that would in a split second change over the cryptos into lawful tenders was one such implied result of the company. In any case, SEC discovered that the company doesn’t have any association with either Visa or Mastercard.
Besides, SEC claimed that the originators likewise paid the big names to promote their product. The popular boxing champion Floyd Mayweather had been embracing this ICO since September, a year ago which was later joined by another big name DJ Khaled.
“As we allege, the defendants relied heavily on celebrity endorsements and social media to market their scheme. Endorsements and glossy marketing materials are no substitute for the SEC’s registration and disclosure requirements as well as diligence by investors.”
In December, numerous investors dragged the company to the court also, however, Mayweather hadn’t been mentioned in the suit.
SEC warns celebrities endorsing ICOs
A year ago, in November, the SEC launched an official warning with respect to celebrities promoting ICOs expressing:
“Celebrities and others are using social media networks to encourage the public to purchase stocks and other investments. These endorsements may be unlawful if they do not disclose the nature, source, and amount of any compensation paid, directly or indirectly, by the company in exchange for the endorsement.”
The SEC likewise cautioned investors “to research potential investments rather than rely on paid endorsements from artists, sports figures, or other icons”.
This came when famous people like Paris Hilton, Jamie Foxx, and Floyd Mayweather among numerous different superstars publicly promoted the token sales.
With SEC ICO fraud warnings against celebrity endorsed ICOs and afterward pressing criminal charges on Centra’s founding individuals, it won’t be long when superstars would be legitimately answerable for promoting the ICOs that ends up being a scam.