New Comptroller Stringer Analysis: Legalizing Marijuana Could Lead to Millions in Tax Revenue for City and State

Comptroller report estimates potential $3.1 billion adult-use marijuana market for New York State including $1.1 billion City market

New York City could realize $336 million in tax revenue from legalizing adult-use marijuana, on top of $436 million for the state

  As support for marijuana legalization grows across the nation, New York City Comptroller Scott M. Stringer today released a new report on the fiscal impact of legalizing adult-use marijuana sales in New York. While New York State continues to study the implications of legalization, the Comptroller’s analysis estimates the potential market for adult-use marijuana in New York State at roughly $3.1 billion, including approximately $1.1 billion in New York City. By applying tax rates in line with other states, New York State could reap as much $436 million annually in new tax revenue from legal marijuana sales, while New York City could garner as much as $335 million – funds that could be used to invest in communities most damaged by decades of criminalizing marijuana usage and possession.

“This is not just about dollars – it’s about justice. Not only is marijuana an untapped revenue source for the City and the State, but the prosecution of marijuana-related crimes has had a devastating and disproportionate impact on Black and Hispanic communities for far too long,” said New York City Comptroller Scott M. Stringer. “There is simply no reason for New York to be stuck in the dark ages. This new analysis shows just how much New York City and State stand to benefit by moving toward legalization. Legalizing marijuana and reclassifying past convictions would be critical steps towards turning the page on decades of failed policies. This is an opportunity to do what’s right and build up the very communities that criminalization tore down.”

Estimated Size of Adult-Use Marijuana Market in New York

Using data from Washington State and Colorado, which legalized adult-use marijuana sales in 2014 as guides, the Comptroller’s office estimated:

• There are roughly 1.5 million regular marijuana users in New York State, of whom roughly 550,000 reside in New York City.
• Assuming New York marijuana users would spend amounts similar to those in Washington and Colorado (about $2,080 in annual spending per user), the Comptroller’s office estimated a total annual adult-use marijuana market of roughly $3.1 billion in New York State, of which $1.1 billion is attributable to New York City.
• These estimates are conservative, in that they ignore the potential impact of some 970,000 workers who work in New York City but live outside it, many of whom might purchase marijuana in the city if sales are legalized. They also do not account for the impact of foreign and domestic tourism on New York’s potential marijuana market.

Estimating the Size of the Adult-Use Marijuana Market

Potential Tax Revenues from Adult-Use Marijuana Sales 

Jurisdiction	Adult Population	Monthly Adult Use	Estimated Monthly Users	Estimated Annual Sales/User	Market Size ($ millions)
Washington State	5540571	11.42%	632733	$2,055.00	$1,300.00
Colorado	4180931	17.12%	715775	$2,106.00	$1,507.70
New York City	6505088	8.43%	548151	$2,080.00	$1,140.40
NY State	15109013	9.90%	1495792	$2,080.00	$3,112.00

 

When estimating the potential tax revenues from marijuana sales in New York, the Comptroller’s office considered a number of factors, including New York’s existing tax regime for medical marijuana and the established excise taxes on items like cigarettes, beer, and liquor. The report found:

• A 25% retail excise tax in New York City would generate up to $336 million in tax revenue annually (and as much as $570 million in other New York State localities).
• For New York State, tax revenue is estimated at roughly $436 million annually, combining a 10% retail excise tax together with sales tax at the existing rate of 4%.

Estimated Tax Revenues from Adult-Use Marijuana Sales

$$ in millions	Market Size	Excise Tax	Sales Tax	Total
New York State	$3,111.00	$311.20	$124.50	$435.70
New York City	$1,140.00	$285.10	$51.30	$336.40

Social Benefits and Considerations of Legalizing MarijuanaThe combined maximum excise tax rate of 35% would be roughly equivalent to Washington State’s current marijuana retail excise tax.

Along with establishing a new, sustainable stream of revenue, legalizing adult-use marijuana could reduce costs for public safety, help mitigate public health problems related to the opioid crisis, and help drive broader economic and social benefits that will accrue after eliminating a source of harm that has afflicted communities of color for so long.

In 2018, the Marijuana Regulation and Taxation Act was introduced by Sen. Liz Krueger and Assemblywoman Crystal D. Peoples-Stokes. The bill would legalize adult possession, while also creating a process to reclassify past convictions related to marijuana and to re-sentence individuals currently incarcerated as a result of a prior marijuana-related offense.

Comptroller Stringer Releases Agency Watch List Report on Homeless Services

As spending on homeless services continues to rise, Comptroller Stringer calls for increased transparency to measure results

Agency Watch List report to be released quarterly on City agencies that must deliver better results

  As the New York City Council Committee on Homeless Services holds a hearing today on the Executive Budget for Fiscal Year 2019, Comptroller Stringer released the second “Agency Watch List” report, this time focused on the City’s spending on homeless services. Amid extraordinary increases in City expenditures on programs to address a historically large homeless population, the Comptroller’s report spotlights the lack of data available to measure the effectiveness of City spending.

The analysis found that while total spending on homelessness across agencies is projected in FY 2018 to increase by 149% from FY 2014, including a more than seven-fold increase in spending on prevention and permanent housing, the population in shelter has barely changed. Meanwhile, comprehensive publicly available information allowing for evaluation of the success of the City’s programs is lacking.

“Resolving our city’s unprecedented homelessness crisis requires urgency and funding, no question – but while the rise in City spending on homeless services has been extraordinary, we are concerned with the lack of results for our most vulnerable New Yorkers,” said New York City Comptroller Scott M. Stringer. “Reducing our homeless population has to be our top priority – and that goal won’t come easy or cheap. But with a cooling economy and uncertainty from Washington, we need to be smarter with our dollars today – and we need to see results. Data-driven policy matters, but without the publicly available data needed to measure results, it’s impossible to evaluate what is working and what is not. We want to see results for the New Yorkers most in need – that’s why we’re shining a spotlight on when and how the City is spending on services to support the homeless.”

The Agency Watch List, first announced in the Comptroller’s Preliminary Budget Presentation, spotlights City agencies – the Department of Correction (DOC), Department of Education (DOE), and Department of Homeless Services (DHS) – that raise the most budgetary concerns due to rapidly increased spending and insufficient measurable results. Reports, to be released on each department quarterly, will review trends and recommend indicators that should be reported and monitored to evaluate the effectiveness of agency spending in achieving the Administration’s stated goals.

New York City’s homeless services expenditures cross five agencies that share responsibilities for supporting, sheltering and permanently housing every eligible person or family that seeks assistance, including the Department of Homeless Services (DHS), as well as the Departments of Social Services, Youth and Community Development, Health and Mental Hygiene, and Veterans Services. Accordingly, the Comptroller has analyzed multi-agency spending on homeless services in his Agency Watch List for FY 2019.

Shelter Population Historically Large

• From FY 2014 to the current year, FY 2018, total citywide spending on homelessness by all agencies rose from $1.2 billion to over $2.9 billion;
• In the last four years, shelter costs have more than doubled, to over $1.9 billion. The City has added $466 million in spending for shelters in 2018 since the budget was adopted last June;
• New York City’s shelter population increased by 17.5 percent between January 2014 and April 2018. The City’s shelter population reached a record high of 61,075 individuals on February 7, 2018; and
• Among the determinants of daily shelter population is the average length of stay in shelter. The Comptroller’s Watch List report found that the number of families with children in shelter for one year or longer increased by 9 percent from June 2014 to February 2018.

Investment in Prevention Services Grows as Shelter Population Remains High

• Spending on programs to prevent homelessness or to provide successful permanent exits from shelter have dramatically expanded from $105 million in FY 2014 to over $700 million in FY 2018 and now constitutes nearly a quarter of total homelessness spending;
• At the same time, the number of single adult shelter entrants has grown while shelter entrances among families with children and adult (childless) families is consistent with, or slightly below, recent levels, contributing to stagnation in the City’s shelter population;
• As the City bolsters its prevention services, including through increased funding for anti-eviction legal services, the number of requests for emergency rent assistance rose 42 percent between FY 2014 and FY 2016, and remains high; and
• Spending on subsidized rental placements through several new initiatives has grown from just $22.9 million in FY 2014, to nearly $287 million in FY 2018 and is budgeted at $369.1 million for FY 2019. Yet, the number of monthly subsidized housing placements for all household types has leveled off since mid-2015 at roughly 800 placements per month.

Use of Cluster Sites and Commercial Hotels Continues as Expenditures Soar

• The City announced in February, 2017 that it would eliminate the use of cluster sites by the end of 2021, and commercial hotel facilities by the end of 2023. However, over the next three years, the City is anticipating nearly $1.1 billion in expenditures for commercial hotel rooms alone;
• On average, the City spent in excess of $1.1 million per month for hotel rooms that were not used during the six month period ending Dec. 31, 2017;
• Last year, the Comptroller’s Office released a report detailing the exorbitant costs and extraordinary increase in City spending on commercial hotels for shelter residents, in which Comptroller Stringer called for greater transparency to ensure the City made progress in eliminating the use of cluster sites and commercial hotels; and
• As part of the Agency Watch List report, Comptroller Stringer is calling once more on the City to provide detailed public data on the number of cluster sites and commercial hotels in use, as well as the size of the population housed in them. Without this data, it is nearly impossible to measure the City’s progress in closing such sites or to monitor the effectiveness of spending.

Over a Dozen Key Indicators Currently Not Reported

A number of key indicators regarding the City’s spending on homeless programs are not currently publicly reported, resulting in a gap between the Administration’s stated goals and the measures available to evaluate their success. These indicators include:

• Applications for shelter by household type, quarterly;
• Reasons for seeking shelter, quarterly;
• Number of cluster sites in use and population housed, monthly;
• Commercial hotel use, utilization rates and expenditures, monthly;
• Subsidized housing placements by type of subsidy, monthly; and
• Preventive services provided, by household type and type of assistance, monthly (partially reported in MMR).

As part of the Agency Watch List report, the Comptroller’s Office is calling on the Administration to immediately make these statistics publicly available, and incorporate them into the Mayor’s Management Report.

Bookkeeper Charged In Manhattan Federal Court With Embezzling Over $3.4 Million From Literary Agency And Its Clients

  Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that DARIN WEBB was arrested this morning on wire fraud charges stemming from his scheme to defraud a Manhattan-based literary agency (the “Agency”) and its clients of more than $3.4 million.  WEBB provided bookkeeping services for the Agency and carried out his scheme by making unauthorized transfers from the Agency’s bank accounts, and then making changes to the Agency’s accounting system to evade detection.  WEBB was arrested this morning in Manhattan, and will be presented today before United States Magistrate Judge Barbara C. Moses.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Darin Webb, a bookkeeper for a firm in the book business, cooked the firm’s books to conceal a multimillion-dollar embezzlement.  Now he is in custody and facing prosecution.” 

FBI Assistant Director William F. Sweeney Jr. said:  “As alleged, Darin Webb was responsible for the financial welfare of the agency whose accounts he oversaw, but instead of upholding his fiscal responsibilities, he spent his time swindling more than $3.4 million from his victims.  Cooking the books rarely pays off in the long run, as the defendant has learned today.”

According to the Complaint unsealed today in Manhattan federal court[1]:

From in or about 2001 through in or about March 2018, DARIN WEBB, the defendant, was engaged as a bookkeeper for the Agency.  From at least January 2011 through March 2018, WEBB used his position as the Agency’s bookkeeper to transfer more than $3.4 million of funds, belonging to the Agency and the Agency’s clients, from the Agency’s bank accounts to bank accounts that WEBB controlled.  In order to evade detection of his criminal conduct and carry out his scheme, WEBB made changes to the Agency’s accounting records to disguise the nature of the transfers.

WEBB, 47, of Manhattan, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant would be determined by the Court.

[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth below constitute only allegations, and every fact described should be treated as an allegation.

BRONX WEEK BUSINESS LUNCHEON

 Over 100 business leaders from the Bronx attended the Bronx Week Business Luncheon when Bronx Borough President Ruben Diaz Jr. gave highlights from his 2017 Annual Bronx Development Report. 

The complete 32 page 2017 Annual Development Report by borough and by Community Board can be found here  https://on.nyc.gov/2rHHTn7. 

  Awards were given to eleven businesses and their owners either based in the Bronx or doing business in the Bronx. They were Associated Supermarkets Group (ASG), Citiwide Exterminating Inc., La Flor de Mayo Express inc., La Rosa Del Monte, Nebraskaland, Pen & Pistol, Puerto Salvo, Puerto Rican USA Importers, Salsa Catering, South of France, and Transcon International. Photos of the event are below.

Above - BOEDC President Ms. Marlene Cintron opens the luncheon.

Bronx Borough President Ruben Diaz Jr. goes over jis 2017 Annual Development Report. 

Above - Ms. Maribel Sof owner of the Restaurant 'South of France' located at 1800 Westchester Avenue Bronx receives her award from BP Diaz and Ms. Cintron.

Below - MS. Zulema Wiscovitch of Associated Supermarket Group with stores in the Bronx receives her award from BP Diaz and Ms. Cintron.

Above - Frank Hernandez of La Flor De Mayo Express INC. receives his award from BP Diaz and Ms. Cintron. 

Below - All the awardees with Bronx BP Diaz (middle back row, and Deputy BP McFadden front row (right). 

BP DIAZ RELEASES ‘BRONX ANNUAL DEVELOPMENT REPORT’

The Bronx was home to $2.7 billion, 16.2 thousand sq. ft. of new development in 2017

  Bronx Borough President Ruben Diaz Jr. released his “Bronx Annual Development Report” this afternoon during the 2018 Bronx Week Business Luncheon at Tosca Marquee in Throggs Neck.

The report finds that The Bronx continues to see incredible interest from all sectors of the development world, be it residential, commercial or institutional. In 2017, The Bronx saw more than $2.7 billion in total development, the second most of any year during Borough President Diaz’s time in office.

The borough also saw 16,263,954 square feet of total development during the same year, 15 percent more than 2016 and the highest of any year of Borough President Diaz’s tenure. In 2017 the borough was also home to 7,379 new residential units of all types, the most of any year since 2009.

“Look at the numbers. We had an amazing 2017. We are continuing to see unprecedented interest in The Bronx from all sectors,” said Bronx Borough President Ruben Diaz Jr. “Working together with our Bronx businesses, along with our development leaders, our community boards, non-profits and elected officials, we are all—together—making The Bronx an even better place to live, work and raise a family.”

“Our borough continues to attract investors, developers and businesses at breakneck speed. These efforts have resulted in a historical decline in unemployment and a massive improvement in the quality of life of our residents,” said Marlene Cintron, President of the Bronx Overall Economic Development Corporation.

In addition to outlining the growth the borough saw in 2017, the “Bronx Annual Development Report” also illustrates the year-to-year investment and construction The Bronx has played host to since 2009, when Borough President Diaz first took office.

Since then, the borough has seen more than $15.4 billion in total development, as well as more than 84.8 million square feet of total development construction. A total of 36,437 residential units have also been constructed in The Bronx since 2009, as well, with 58 percent of those (21,157) having been developed with government subsidies.

“The vast majority of this new housing has been low and moderate income units. We are helping to keep people in The Bronx,” said Borough President Diaz. “We are making sure that new development works for those families who already call The Bronx their home, and that new attention in The Bronx helps everyone thrive.”

The full report can be read at https://on.nyc.gov/2rHHTn7.

CM Levine Launches “Languages for All” Campaign to Expand Bilingual Education in City Schools

  Today, Council Member Mark Levine launched a new Languages for All campaign aimed at creating a robust expansion of foreign language education programs in NYC.

Learning a foreign language early in life can be an invaluable asset to a child growing up in the world’s most global city. However, very few of the DOE’s language learning programs reach students during their most formative years. In addition to the obvious economic benefits associated with knowing a second language, studies have proven that language learning benefits students in countless ways, including: higher levels of academic achievement, improved cognitive ability, enhanced decision-making ability, and even staving off the effects of Alzheimer’s disease.

Council Member Levine is renewing his call for the City to increase the number of elementary students in immersion programs to 20% of all students and to grow the number of languages offered to 20, a goal the City has not yet met despite progress.

The DOE currently offers 245 Dual Language programs across the five boroughs for 11 languages, including: Spanish, Chinese, French, Russian, Polish, Japanese, Arabic, Haitian Creole, Italian, Hebrew, and Korean.

Council Member Levine introduced two pieces of legislation to expand dual languages programs in the City, including:

·     A bill directing the DOE to annually report to the Council on the number and progress of foreign language learning (FLL) programs in the City (Int 762-2018); and

·  A resolution calling on the State to enact A.1154/S. 3641 sponsored by Assembly member Nily Rozic and State Senator Kevin Parker that would establish incentives for college students to become bilingual-certified teachers (Res 273-2018).

“New York is the most multilingual city in the world, and yet, our City’s public schools are falling behind when it comes to foreign language instruction at an early age,” said Council Member Levine. “As the world becomes ever more connected, multilingualism is an increasingly valuable asset in the job market. Language learning-- especially at a young age--also aids cognitive development and promotes academic achievement in other subjects. For young people to succeed in today’s global world, we need to create a language learning system for the 21st Century, focused on immersion at a young age.”

Former District Manager Indicted for Allegedly Forging Signature of Community Board Chairman to Give Himself Unauthorized Raises

Defendant Allegedly Stole $38,345 in Salary to Which He Was Not Entitled

  Brooklyn District Attorney Eric Gonzalez, together with New York City Department of Investigation of Commissioner Mark G. Peters, today announced that the former District Manager of Community Board 6, which includes Cobble Hill, Carroll Gardens, Red Hook, and Park Slope, was arraigned today on a 17-count indictment in which he is charged with forgery and other charges for forging signatures on four occasions to give himself raises without approval or authorization.

  District Attorney Gonzalez said, “This defendant allegedly sought to enrich himself with taxpayer money to which he was not entitled. This was a betrayal of the public trust that cannot be tolerated. I remain committed to rooting out crimes such as this that can carry a heavy cost over the long term. We will now seek to hold this defendant accountable.”

  Commissioner Peters said, “This defendant gave himself multiple raises, including a merit increase, and falsified his manager’s authorization to get them approved by the City, according to the charges. New Yorkers expect – and deserve – public servants serving their communities with integrity that is beyond reproach. DOI will continue to pursue those City workers criminally who take advantage of taxpayers and steal City funds. We thank our partners at the Brooklyn District Attorney’s Office for their collaboration on this investigation.”

  The District Attorney identified the defendant as Craig Hammerman, 53, of Fort Greene, Brooklyn. He was arraigned today before Brooklyn Supreme Court Justice Danny Chun on an indictment in which he is charged with four counts of second-degree forgery, four counts of second-degree criminal possession of a forged instrument, four counts of first-degree offering a false instrument for filing, four counts of first-degree falsifying business records and one count of third-degree grand larceny. He faces up to seven years in prison if convicted of the top count. He was released without bail and ordered to return to court on August 8, 2018.

  The District Attorney said that, according to the investigation, between May 2015 and October 2017, the defendant, who was the District Manager of Community Board 6 (CB 6), allegedly forged the signature of Community Board Chairman Sayar Lonial three times and forged the signature of former Community Board Chairman Gary Reilly one time to give himself unauthorized raises.

  The forgery was discovered by CB 6 during an internal investigation in September 2017, and the matter was referred to the Department of Investigation. A subsequent investigation by DOI and the DA’s office revealed a series of forged letters authorizing salary increases. A letter dated October 2016, which was sent to the office of the Brooklyn Borough President, authorized a raise for Hammerman and contained Lonial’s forged signature. A second letter dated March 2017 was sent to the Office of Management and Budget authorizing a salary increase for Hammerman and contained Lonial’s forged signature. This document was accompanied by supporting documentation, referred to as a Planned Action Report, which also contained Lonial’s forged signature. A third letter was discovered, dated May 2015, which authorized a raise for Hammerman and contained the signature of Gary Reilly, who was, at the time, the Chairman of CB 6. A representative of the Brooklyn Borough President’s office, which processes salary increases for CB 6 employees, calculated that Hammerman received $38,345 in salary that he was not entitled to as a result of his alleged fraud.

  Hammerman’s salary was $121,931 when he resigned in October 2017.

 The case was investigated by Special Investigator Beatriz Solorzano, of the New York City Department of Investigation, under the supervision of Inspector General Andrew Sein, Associate Commissioner Andrew Brunsden, Deputy Commissioner/Chief of Investigations Susan Lambiase, and First Deputy Commissioner Lesley Brovner.

The District Attorney thanked the Office of Borough President Eric L. Adams for its cooperation in this investigation.

An indictment is an accusatory instrument and not proof of a defendant’s guilt

Founders Of Cryptocurrency Company Indicted In Manhattan Federal Court With Scheme To Defraud Investors

Government Recovers Digital Funds Worth More Than $60 Million

  Robert Khuzami, Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that a grand jury in the Southern District of New York has returned an Indictment charging SOHRAB SHARMA, a/k/a “Sam Sharma,” RAYMOND TRAPANI, a/k/a “Ray,” and ROBERT FARKAS, a/k/a “RJ,” a/k/a “Bob,” the three co-founders of a startup company called Centra Tech, Inc. (“Centra Tech”), that purported to offer cryptocurrency-related financial products, with conspiring to commit, and the commission of, securities and wire fraud in connection with a scheme to induce victims to invest millions of dollars’ worth of digital funds for the purchase of unregistered securities, in the form of digital currency tokens issued by Centra Tech, through material misrepresentations and omissions.  SHARMA, TRAPANI, and FARKAS were all arrested last month based on criminal complaints filed by this Office charging them with the same crimes. 

Following their arrests, this Office and the Federal Bureau of Investigation (“FBI”) seized 91,000 Ether units, consisting of digital funds raised from victims as part of the charged scheme.  This seized digital currency is presently worth more than $60 million.  The case has been assigned to United States District Judge Lorna G. Schofield.

Mr. Khuzami said:  “As alleged, the defendants conspired to capitalize on investor interest in the burgeoning cryptocurrency market.  They allegedly made false claims about their product and about relationships they had with credible financial institutions, even creating a fictitious Centra Tech CEO.  Whether traditional or cutting-edge, investment vehicles can’t legally be peddled with falsehoods and lies.”

According to the allegations in the Indictment filed in this case, the criminal complaints previously unsealed in this case, and in other filings and statements at public court proceedings in the case:[1]

After SHARMA and TRAPANI worked together at a luxury car rental company in Florida called “Miami Exotics,” they and FARKAS co-founded a startup company called Centra Tech that claimed to offer cryptocurrency-related financial productions, including a purported debit card, the “Centra Card,” that supposedly allowed users to spend various types of cryptocurrency to make purchases at any establishment that accepts Visa or Mastercard payment cards.  In approximately July 2017, SHARMA, TRAPANI, 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, SHARMA, TRAPANI, 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; (b) that Centra Tech had formed partnerships with Bancorp, Visa, and Mastercard to issue Centra Cards licensed by Visa or Mastercard; and (c) that Centra Tech had money transmitter and other licenses in 38 states, among other claims.  Based in part on these claims, victims provided millions of dollars’ worth of digital funds in investments for the purchase of Centra Tech tokens.  In or about October 2017, at the end of Centra Tech’s ICO, those digital funds raised from victims were worth more than $25 million.  Due to appreciation in the value of those digital funds raised from victims, those digital funds are presently worth more than $60 million.    

The representations that SHARMA, TRAPANI, 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 fictitious people who were fabricated to dupe investors; Centra Tech had no such partnerships with Bancorp, Visa, or Mastercard; and Centra Tech did not have such licenses in a number of those states.

SHARMA, TRAPANI, and FARKAS were well aware of the falsity of such claims.  For example, with respect to Centra Tech’s purported partnerships with Bancorp, Visa, and Mastercard, SHARMA engaged in a cellphone text message conversation with TRAPANI on or about July 31, 2017, in which they discussed Centra Tech’s lack of actual partnerships with banks or credit card companies.  During that exchange, SHARMA wrote:  “Should write down a list of places to call tomorrow,” “For the conbranded [sic] card.”  Later in the exchange, SHARMA wrote:  “Gotta get it going on the banks today plz.”  SHARMA also subsequently wrote:  “We just need to get s [sic] banking license,” “Need our direct agreement with visa,” “Or MasterCard,” “That’s the move,” “Cut out the middle man,” “I wish we just knew someone.” 

With respect to Centra Tech’s purported CEO “Michael Edwards,” SHARMA text-messaged TRAPANI on or about July 29, 2017, that they “Need to find someone who looks like Michael,” “Team photos,” “He’s real lol,” “Everyone real,” “Except Jessica,” “And Mike.”  Similarly, SHARMA later wrote during that same exchange:  “Gonna kill both Ceo and her,” “Gonna say they were married and got into an accident.” 

Finally, with respect to Centra Tech’s purported money transmitter and other licenses in 38 states, SHARMA had a text message conversation with TRAPANI and FARKAS on or about August 30, 2017, about applying for state licenses that Centra Tech had previously represented it already held in 38 states.  For example, SHARMA wrote in one message on or about August 30, 2017, to TRAPANI and FARKAS:  “Gotta apply for all licenses,” “Should I even say this.” 

On or about May 2, 2018, this Office and the FBI seized, pursuant to a judicially authorized seizure warrant, 91,000 Ether units, consisting of digital funds raised from victims who purchased digital tokens issued by Centra Tech during its ICO based on fraudulent misrepresentations and omissions.  The seized funds are presently worth more than $60 million. 

In a separate action, the United States Securities and Exchange Commission (the “SEC”) has filed civil charges against SHARMA, TRAPANI, and FARKAS.           

SHARMA, 27, TRAPANI, 27, and FARKAS, 31, are all residents of Florida.  All three of them are charged in a four-count Indictment 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.  In addition to potential prison sentences, each of these charges also carries potential financial penalties.  The maximum potential prison 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.  Mr. Khuzami also thanked the Department of Homeland Security, Homeland Security Investigations (“DHS-HIS”) and the District Attorney’s Office for New York County for their assistance in this case.

The allegations contained in the charging documents in this case are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

[1] As the introductory phrase signifies, the entirety of the text of the Complaints and the Indictment, and the description of the Complaints and the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.