Centra Tech ICO Lawsuit Worth $32 Million Removes DJ Khaled, Floyd Mayweather As Defendants
Centra Tech ICO Lawsuit Removes DJ Khaled And Floyd Mayweather As Defendants
- Centra Tech lawsuit dismisses multiple parties from being held responsible, including Floyd Mayweather, DJ Khaled, the CTO of Centra Tech, and the Director of PR for Centra Tech.
- The charges dropped include the sale of unregistered securities and securities fraud.
The cryptocurrency industry has become unfortunately known for the multiple scams of the token offerings that take place. While consumers have become a little wiser through the years, the ICO for Centra Tech in 2017 was a different story. Both DJ Khaled and Floyd Mayweather got roped into a lawsuit for the alleged fraud committing by the platform, due to their promotion of the token sale. However, a recent report from The Block indicates that both celebrities have been dismissed from the lawsuit.
First, let’s take the clock back a little bit. The Centra Tech initial coin offering (ICO) originally took place from July 2017 to April 2018, during which time the ICO raised over $32 million in contributions from investors. The ICO was meant to support a crypto debit card at the time, that claimed to already have eight “major cryptocurrency blockchain assets” attached to it. The promotional materials also said that the card would be accepted at all locations that take Visa or Mastercard. Even the whitepaper broke down the potential profitability of the tokens, adding fake executives with erroneous backstories and even fake LinkedIn profiles.
During the ICO, Centra Tech used some of their funding to pay celebrities to promote the token sale, which included Mayweather and DJ Khaled. Both individuals use social media for the promotion of the Centra Tech token sale, with Mayweather posting a tweet of himself with the alleged debit card, and Mayweather posting similar activity on social media. The SEC got both of them to agree to consent orders, which stated that they violated anti-touting rules. Essentially, that means that they have to admit to being paid to promote the securities and that they’ve paid fines in doing so.
The plaintiffs that initiated the securities fraud class action lawsuit went after the founders of Centra Tech, Mayweather, Khaled, and CTO Steven Sykes. The defendants filed motions to dismiss with the court, and those requests have now been approved. In doing so, the parties did not argue with the statements that the CTR tokens should be classified as unregistered securities and that they were sold in interstate commerce.
Mayweather was dismissed from the case because the Court found that the plaintiff did not prove the Mayweather had been able to “successfully” solicit the sale of the CTR tokens. He posted two tweets as part of his paid agreement, encouraging followers to “get yours before they sell out,” adding, “I got mine.” However, there’s no stronger solicitation that Mayweather participated in, and there aren’t even allegations that Mayweather even had contact with the plaintiffs or that the plaintiffs saw the tweets. Considering that the market for the CTR tokens existed before Mayweather joined, and did not appear to be affected by his involvement.
Similar reasoning was applied for DJ Khaled in the case, saying that there was not any proof that he managed to succeed in the solicitation of the plaintiffs. Like Mayweather, there was also no proof that the plaintiffs even saw his social media engagement, or that he “created the market” for CTR with the fraud.
The motion to dismiss was filed by CTO Sykes, as well, even though he created the website’s content and the “customer experience.” The motion adds that, even though Sykes was involved with the website, he was not a seller of the securities, based on Section 12(a)(1) of the Securities Act. The plaintiffs argued back that the solicitation on the website was “equally attributable” to Sykes, which means he technically should be considered a “seller” anyway.
In response, the Court said that the simple involvement with the company does not mean that Sykes sold anything and does not prove that he directly solicited any investors or the plaintiffs. The court commented on the vagueness of the allegation, missing any kind of detail on the contact, the date of the launch, the false statements, the individual who approved content on the website, or even if the plaintiffs viewed the website at all. As a result of their lack of specificity, the CTO was dismissed from the case as well.
The final individual dismissed, in this case, is the Director of PR. Much like the other defendants, there was a significant lack of evidence that the plaintiffs even engaged with any statements he made regarding the platform. Essentially, as the case is still unfolding, despite the clear scam that Centra Tech has turned out to be, the activities and behavior of any of the above defendants were not enough to convince the Courts that they should be liable. They have been freed of the charges of selling unregistered securities and securities fraud.