Crypto is back in the news, and it seems that this time, the ICO market went ten rounds with the SEC and took a serious beating. Along with the heavy uncertainty around the cryptocurrency market and ICO's in general, the Securities and Exchange Commission (SEC) just deemed Centra, the Floyd Mayweather backed ICO, a fraud.
The SEC has been pointing fingers at ICOs' and cryptocurrency in general for a while now, and this was a clear sign that they mean business. Subpoenas are being handed out across the board, within a wider investigation into digital currency.
Those who staunchly support the cryptocurrency market will claim as always, that you can't and shouldn't stop free trade, but we must bear in mind that the SEC is there to protect citizens against scammers and con artists.
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Investing in any idea, does not necessarily mean you understand the proposal, it just means you have the cash (or in this case, coin) and whilst hundreds of investors try to claw back their crypto-cash from this 'ICO get-rich quick scheme' for two boys from Miami, the SEC is simply demonstrating that, a virtual scam is still a scam.
What did Centra's founders do?
Robert Farkas and Sohrah Sharma are suspected of collecting $32 million for investment through CTR tokens (a cryptocurrency coin) in a fraudulent ICO for unregistered investments.
The co-founders claimed that the funds would build a platform of financial products that could convert bitcoin to US dollars and offered a debit card backed by Visa and Mastercard. The Centra website had the Visa logo featured numerous times, the only problem was, they forgot to tell Visa.
Visa had never approved the Centra card, in fact Centra never even applied to get approved by Visa. The SEC is also claiming that to promote the ICO, Sharma and Farkas created a range of fictional but highly marketable executives, misleading website info and of course paid off celebrities to promote the ICO on Twitter.
It seems telling that ICOs that need the backing of celebrities for their crowd sale, rather than a committed white paper with a well-thought out game-plan, would have rung huge alarm bells for everyone, but, hindsight is a beautiful thing.
In the Crypto-market as in every single other market where vast wads of cash are on the table, cunning conmen will use smoke, mirrors and an entourage of famous people to convince investors of the financial gains which really have little or no potential substance.
Whilst Investors listened to Money Mayweather instructing them to buy coins before they were all sold, they overlooked the four most important investment assessors of any ICO: the team; the innovation; the supply available and to do your own research.
A closer look into Centra would have immediately revealed that the team consisted of Sharma, who has been sued in Florida and New York multiple times and has virtually zero crypto- experience, having run a luxury car hire business, and also that Visa had no ties to Centra.
Backing an ICO or investing in any crypto idea seems very attractive and forward looking, however it also appeals to many investors who don't necessarily understand the Crypto-market or the projects.
With a lack of Crypto regulation, more and more criminals will take advantage of the loop holes to extort hungry investors, so investors remember, the SEC is on our side when it comes to ICOs.