SEC Charges DJ Khaled & Floyd Mayweather-Backed ICO With FraudAuthor: Adam JamesLast Updated: 03 April 2018 The U.S. Securities and Exchange Commission has charged the founders of the DJ Khaled and Floyd Mayweather-backed CTR Token with fraud, illustrating a push to purge the ICO (Initial Coin Offering) space of bad actors.Heavy HittersAccording to an official statement from the U.S. Securities and Exchange Commission (SEC), the independent agency has charged two individuals “with orchestrating a fraudulent initial coin offering (ICO) that raised more than $32 million from thousands of investors last year.”The SEC claims that Sohrab “Sam” Sharma and Robert Farkas illegally offered and sold unregistered investments through Centra Tech. Inc.’s CTR Token. In doing so, the pair also duped investors with various lies.The duo falsely offered Visa and MasterCard-backed debit cards allowing for the conversion of cryptocurrencies into USD, despite having no such agreement with either credit card company. Additionally, they fraudulently promoted their company’s ICO with “fictional executives with impressive biographies,” while sharing “false or misleading marketing materials.”States Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement: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. As the complaint alleges, these and other claims were simply false.Sharma and Farkas also paid celebrities to promote their scam on social media. The fraudulent ICO was most notably promoted by the likes of professional boxer Floyd Mayweather and rapper DJ Khaled on their social media platforms — though charges have not been filed against either celebrity. States Steve Peikin, Co-Director of the SEC’s Division of Enforcement: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.Both individuals have been arrested, despite Farkas’ best attempt to reserve a flight out of the United States. He was arrested before being able to board.The SEC’s crackdown on Centra Tech illustrates the fact that both the independent federal agency and the criminal justice system are prepared to take fraudulent cryptocurrency-related companies to task for criminal activity.ICO takedown by SEC on civil side but in parallel DOJ (SDNY) announces *criminal* charges against Centra Tech co-founders. As I've predicted we'll start to see DOJ treating cases of pure fraud in ICO space as a criminal matter. https://t.co/c8cceNU2yG— Kathryn Haun (@katie_haun) April 2, 2018The SEC’s complaint was filed in federal court in the Southern District of New York and officially charges Sharma and Farkas with violating the anti-fraud and registration provisions of the federal securities laws.If successful, both individuals will be punished with “permanent injunctions, [the] return of allegedly ill-gotten gains plus interest and penalties, as well as bars against Sharma and Farkas serving as public company officers or directors and from participating in any offering of digital or other securities.”At the same time, the U.S. Attorney’s Office for the Southern District of New York has announced criminal charges against Sharma and Farkas.Are you happy to see the SEC and U.S. Attorney’s Office for the Southern District of New York shut down the fraudulent ICO? Do you think a culling of scams is necessary to help the cryptocurrency space mature? Let us know in the comments below!Images courtesy of Bitcoinist archives, Twitter/@katie_haun, ShutterstockThe post SEC Charges DJ Khaled & Floyd Mayweather-Backed ICO With Fraud appeared first on Bitcoinist.com.