SEC KO's Mayweather-backed ICO over fraud allegations

SEC KO's Mayweather-backed ICO over fraud allegations

An initial coin offering (ICO) that raised $32m and was backed by celebrity boxer Floyd Mayweather has been dealt a knockout blow after the US Securities and Exchange Commission (SEC) arrested the company's founders for fraud.

The agency has charged the founders of Centra Tech with selling unregistered securities, accusing Sohrab Sharma and Robert Farkas of falsely claiming that proceeds from the ICO would go towards developing new technology backed by Visa and Mastercard.

The SEC also claims that Centra's ICO used paid endorsements from the likes of Mayweather and DJ Khaled, a music producer famous for his 2010 hit All I Do Is Win, to attract unwitting investors, and created false marketing material which included the names of fictional executives. 

“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,” said Stephanie Avakian, co-director of the SEC’s Division of Enforcement. “As the complaint alleges, these and other claims were simply false.”

The SEC went on to state that “endorsements and glossy marketing materials are no substitute for the SEC’s registration and disclosure requirements as well as diligence by investors".

ICOs have come under increasing scrutiny from regulators around the globe due to the concern that they are too often a mechanism for financial scams. In September 2017 China's central bank banned ICOs while Facebook, Google and Twitter have all banned the adertisements of ICOs on any of their social media platforms. 

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