Blockchain Startup Centra Tech Faces Class Action Lawsuit Over $32M USD ICO
A class action lawsuit has been filed against Centra Tech over an initial coin offering (ICO) that raised $32 million last month. The suit alleges the company misled investors about its relationships with two major credit card networks and created fake team members on its website.
Centra Tech claimed to have developed platforms that connect world commerce and cryptocurrenicies. According to the company, the ICO funds were to be used for the creation of “the world’s first multi-blockchain debit card with a smart and insured wallet.”
Before conducting the ICO, the Miami Beach-based blockchain firm brought on board such celebrity endorsers as boxing champion Floyd Mayweather Jr. and musician DJ Khaled to promote its token sale. In September, the company raised its $32 million.
In a blog post on October 31, Centra Tech announced that two of its founders, Sam Sharma and Ray Trapani, were stepping aside to support the continued growth of the company. Centra’s general counsel Allan Shutt said that Sharma and Trapani made the decision to leave the company on their own after an unflattering profile in The New York Times. He added that it’s not unusual for founders to leave a company once it’s outgrown them.
According to the New York Times article, neither Sharma nor Trapani had any professional experience with cryptocurrencies and blockchain technologies, or with the debit cards they were hoping to build. Sharma’s primary business experience was at Miami Exotics, a luxury car rental business that he built with Centra CMO Robert Farkas. Trapani was a credit repair specialist with a penchant for pictures of luxury cars and stacks of $20 bills.
More than a month after Sharma and Trapani left the startup, plaintiff Jacob Zowie accused Sharma, Trapani, Farkas and William Hagner, as well as Centra Tech, of violating US securities law. Zowie alleges that the ICO was an unregistered sale of securities under federal law and seeks to allow thousands of investors to get their money back.
Filed in Miami by Komlossy Law in Florida, the complaint also accused the defendants of misleading investors about the nature of its relationship with card networks Visa and Mastercard, as well as listing fake team members on its website.
Centra Tech disputed the allegations in the complaint. The company said the lawsuit “repeats unfounded claims” regarding Centra Tech. The company added that the plaintiff’s complaint attempts to mimic claims and allegations the Securities and Exchange Commission has lodged against other ICOs.
