Robert Khuzami, the Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the arrest of RAYMOND TRAPANI, a/k/a “Ray,” a co-founder of a cryptocurrency company called Centra Tech, Inc. (“Centra Tech”), and the unsealing of a criminal complaint charging TRAPANI 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. TRAPANI was arrested this morning and will be presented in U.S. District Court for the Southern District of Florida. Two other Centra Tech co-founders, Sohrab Sharma, a/k/a “Sam Sharma,” and Robert Farkas, a/k/a “RJ,” a/k/a “Bob,” were arrested earlier this month based on a criminal complaint charging them with the same crimes.
Deputy U.S. 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.”
According to the allegations in the criminal Complaint unsealed in Manhattan federal court against TRAPANI:[1]
After TRAPANI 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 that 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, in oral and written offering materials that were disseminated via the internet, represented: (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 claims that TRAPANI and his co-conspirators, Sharma and Farkas, made to help secure these investments, however, were false. 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.
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 – 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.”
In a separate action, the SEC filed civil charges against TRAPANI. Earlier this month, the SEC also filed civil charges against Sharma and Farkas.
TRAPANI, 27, is a resident of Florida. TRAPANI is charged in a four-count criminal complaint with 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. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Khuzami praised the work of the FBI and thanked the SEC for its assistance.
The allegations contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
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