Mayweather-backed cryptocurrency startup shutdown by the feds, founders arrested for fraud

Two Miami-based founders behind the cryptocurrency startup Centra were arrested Sunday and are facing federal criminal and civil charges stemming from the company's $32 million initial coin offering (ICO) in September.

Sam Sharma and Robert Farkas are accusing of orchestrating a fraudulent ICO, the U.S. Attorney's office for the Southern District of New York announced late Monday afternoon.

The company is being shuttered by the Securities and Exchange Commission (SEC).

"We allege that Centra 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," Stephanie Avakian, codirector of the SEC's Division of Enforcement, said in a statement. "As the complaint alleges, these and other claims were simply false."

According to their website, Centra offers "blockchain products such as a Wallet to store digital assets, a Prepaid Card to spend the digital assets, and three soon to be released products and services, which include a Marketplace to buy goods with the digital assets, a cryptocurrency Exchange Platform to buy, sell and trade digital assets, and a open-source hyper speed DPoS Blockchain."

The New York Times reported last October that Centra’s founders had no apparent experience in cryptocurrency engineering, or with the credit card business. Furthermore, some were previously accused of business fraud and financial negligence, and faced perjury charges in a drunk driving case. Other people initially listed as founders of the project were made-up.

Centra sold $32 million in "CTR Tokens" to investors in September. CTR Tokens, according to their website "are a decentralized currency based on the Ethereum network." It is also described as "necessary to use the Centra Product line and ecosystem."

After announcing its product in August 2017, Centra was backed by former five-division world champion Floyd Mayweather and musician DJ Khaled.

At the close of the stock market Monday, Centra dropped nearly 28 percent, standing at barely over 22 cents a share.

No charges have been filed against Mayweather or DJ Khaled for their roles in the organization.

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