May 15, 2018
On May 2, 2018, Leon Vaccarelli, a defendant in an ongoing SEC litigation, was indicted in a parallel criminal proceeding in the United States District Court for the District of Connecticut on multiple counts of mail fraud, wire fraud, and money laundering. As previously alleged in the SEC Complaint, Vaccarelli,fraudulently persuaded several elderly customers to invest with him but he allegedly deposited customer funds into his personal and business bank accounts. Allegedly, Vaccarelli asked one customer to sign an agreement that she would not provide certain information to FINRA or the SEC.
You know how you plan for months for a big party and then you send out invitations, and some folks don't get back with a "yes" or a "no" and others ask if they can bring a guest and then, the day of the party, there's a hurricane, so virtually no one can get to your house and even if they did, the caterer couldn't make it, and, of course, a few folks who told you that they couldn't come show up because they lost power to their house and figured since you were having a party and you had asked them that they may as well show up given how the storm had forced them out of their home? Yeah, I know, we've all been through that, right? Anyway, so . . . we got this FINRA arbitration in which a customer is seeking some $108,000 in losses and hired a lawyer but then his lawyer withdrew and a lawyer for some respondents withdrew and some of the respondents either got dismissed or filed for bankruptcy or got expelled by FINRA and then the public customer asks FINRA for help and, well, you've heard that whole thing before, right?
Ohrab Sharma a/k/a "Sam Sharma," Raymond Trapani a/k/a "Ray," and Robert Farkas a/k/a "RJ," a/k/a "Bob," co-founders of a Centra Tech, Inc. ("Centra Tech"), a company that purported to offer cryptocurrency-related financial products were indicted in the United States District Court for the Southern District of New York on one count of conspiracy to commit securities fraud; one count of conspiracy to commit wire fraud; one count of securities fraud; and one count of wire fraud. The charges arose in connection with the Defendants' alleged scheme to induce victims to invest millions of dollars' worth of digital funds for the purchase of digital currency tokens issued by Centra Tech. Following the Defendants' arrests, this Office and the Federal Bureau of Investigation seized 91,000 Ether units worth over $60 million and representing digital funds raised from victims. The SEC has filed a parallel civil action against Sharma, Trapani, and Farkas.The DOJ Press Release alleges in part that:
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."
Repeat Investment Fraudster Sentenced to 8 Years in Prison for Wire Fraud, Securities Fraud and Aggravated Identity Theft / Victims met Defendant through Martial Arts Studio; Defendant lied about Criminal Past and Stole Disabled Man's Retirement Savings (DOJ Press Release)
Richard Thomas Zieske was convicted in the United States District Court for the Western District of Washington of five counts of wire fraud, one count of securities fraud and two counts of aggravated identity theft. Zieske was sentenced to 8 years in prison plus three years of supervised release. In 2005, Zieske as sentenced to 41 months in prison and ordered to pay more than $1.3 million in restitution after pleading guilty to mail fraud, securities fraud and wire fraud in connection with his fraudulent solicitation of nearly $2 million from members of his church and others. As set forth in the DOJ Press Release in part:
[I]n 2013, ZIESKE overheard a member of his Renton martial arts studio talking about his 401k account. The victim had been forced to retire and limit his martial arts due to a degenerative neck condition. ZIESKE convinced the victim to allow him to manage more than $95,000 in retirement funds, promising big returns. Instead, ZIESKE used the money to purchase a limited edition Harley Davidson motorcycle, pay for liposuction surgery, and finance a luxury SUV. ZIESKE attempted to recruit other 'investors,' and convinced the founder of the martial arts studio to invest $50,000 with him.
In the Matter of Gary C. Snisky (SEC ALJ Initial Decision; Init. Dec. Release No. 1251; Admin. Proc. File No. 3-17645)
On February 5, 2015, Gary C. Snisky pled guilty to committing mail fraud and to engaging in monetary transactions in property derived from mail fraud, which resulted in $5,226,965.93 in investors' losses. He was sentenced to two concurrent eighty-four month terms of imprisonment, and ordered to pay $2,531,032.22 restitution. On August 11, 2016, a default final judgment in the form of a permanent injunction was entered against Snisky. In consideration of the criminal and civil cases, the SEC barred Snisky from association with a broker, dealer, investment adviser,
municipal securities dealer, municipal advisor, transfer agent, or nationally
recognized statistical rating organization.