Third Cryptocurrency Co-Founder Behind Bars for Defraud Case

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Florida – A third co-founder of a cryptocurrency company called Centra Tech, Inc. was arrested recently after arrests of two others earlier this month in a securities fraud and wire fraud cases according to Robert Khuzami, the Attorney for the United States and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (FBI).

Raymond Trapani, (Ray) was arrested and charged with securities fraud and wire fraud offenses in connection with a scheme to induce victims to invest more than $25 million in investments through material misrepresentations and omissions in connection with an initial coin offering. Two other Centra Tech co-founders, Sohrab Sharma, (Sam Sharma) and Robert Farkas, (RJ or Bob) were arrested earlier this month based on a criminal complaint charging them with the same crimes.

Deputy US Attorney Robert Khuzami said: “As alleged, Raymond Trapani conspired with his co-defendants to lure investors with false claims about their product and about relationships they had with credible financial institutions. While investing in virtual currencies is legal, lying to deceive investors is not.”

Allegation Details

According to the allegations in the criminal complaint unsealed in Manhattan federal court against Trapani, who worked with Sharma and Farkas at a luxury car rental company called “Miami Exotics” in Florida, the three of them co-founded a company called Centra Tech. The company claimed to have developed a debit card, the “Centra Card,” that purportedly allowed users to spend cryptocurrency to make purchases at any establishment that accepts Visa or Mastercard.

In approximately July 2017, Trapani, along with Sharma 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, Trapani and his co-conspirators, Sharma and Farkas, represented the following in oral and written offering materials that were disseminated via the internet:

(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; and

(b) that Centra Tech had formed a partnership with Bancorp to have Bancorp issue Centra Cards licensed by Visa or Mastercard, among other claims.

Based in part on these claims, victims provided more than $25 million in investments for the purchase of Centra Tech tokens.

The allegations state that the claims that Trapani, Sharma, and Farkas made to help secure these investments, however, were false. The documents disclosed that, “In fact, the purported CEO “Michael Edwards” and another supposed member of Centra Tech’s executive team are fictional people who were fabricated to mislead investors, and Centra Tech had no relationships with Bancorp, Visa, or Mastercard.”

Cleanup Effort

On or about September 29, 2017 – the date on which the United States Securities and Exchange Commission (“SEC”) announced that it filed a civil complaint charging a company called “RECoin” and its founder, among others, with defrauding investors in an unregistered offering of securities styled as an initial coin offering,” the three decided to clean up the operation.

Sharma asked Trapani and Farkas to remove certain materials from Centra Tech’s website that contained “fufu,” or fake information, about Centra Tech’s purported relationship with Visa because, according to Sharma, “I rather cut any fufu . . . Now . . . Then worry . . . Anything that doesn’t exist current . . . We need to remove.” Later that day, Sharma text messaged Trapani and Farkas that “Sec just shut down REcoin . . . Read the article . . . We gotta clean up every single thing that we can’t do . . . And can’t offer today.” Shortly thereafter, Trapani responded that RECoin “were pitching a straight security,” to which Sharma wrote “Yea . . . I know . . . But [still] fraud can be a word thrown around.”* * *

Trapani, a 27 year old Florida resident, is charged in a four-count criminal complaint. This includes 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.

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