Centra technology swindled investors with the promise of digital technology. They used a sophisticated marketing campaign and spun a web of lies about partnerships they made with legitimate businesses to sell them on the promise. After arresting the suspects in 2018, the SEC stated that the complaint alleges that these and other claims are simply false. Later that year, the agency reached settlements with Khaled as well as Mayweather. Farkas’s co-workers in the venture pleaded guilty to the fraud and lost their earnings.
After pleading guilty to securities fraud, the co-founder and chief executive of a cryptocurrency company that raised over $25 million from investors during an initial coin offering (ICO), Floyd Mayweather promoted him on Twitter. Robert Farkas (34 years old) was sentenced to a year in prison and ordered to forfeit $347062.58 as well as a Rolex watch he bought with the proceeds of the ICO.
Ilan Graff, a prosecutor, stated that “Farkas’ and his co conspirators created fictitious executives to deceive investors into paying millions of dollars for a fraudulent ICO.”
Farkas and his colleagues from a luxury rental car business formed Centra Tech in 2017. They claimed that Centra Tech would offer a debit card that converts cryptocurrencies into dollars. During the much-hyped ICO, the company made a series of false claims. These included the existence of a partnership between Mastercard Incorporated and Visa Inc. (V), as well as a Harvard-educated chief executive officer.
One of the most prominent cases of the ICO bubble, which began in 2017, and continued until 2018, was the Centra Tech offering. Venture capital was no longer the preferred way for entrepreneurs to raise capital during this time. Offerings offered a variety of crypto products and raised capital from lay investors. They were limited to a whitepaper with the promise of a product in the future and a promise of cryptocurrency coins.
Multiple offerings were seized by the SEC, which led to multiple arrests. The ICO market has only a fraction of the 2017 fundraising volume as of today.
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PAE pushes for the acquisition of $208M Centra once deal pause is over
PAE set out to become a publicly traded company in January to improve its financial capabilities for acquisitions by refinancing and paying down debt.
The coronavirus pandemic struck, and credit markets were largely shut down. That put merger-and-acquisition initiatives on hold for PAE, though they were far from alone in that respect.
The current financing market is more open and different than ever. PAE, Falls Church, Virginia, has announced that it will acquire Centra Technology for $208 million in cash. A Tuesday announcement by PAE confirmed that it had closed on a debt restructuring arrangement.
PAE discovers in Centra a technology- and professional services company that serves agencies from the intelligence community, national security and homeland security sectors. PAE also cites the value of Centra’s 760 employees, 700 of whom hold the highest security clearances.
In a conference call Monday morning, John Heller, PAE CEO, stated that “By combining Centra’s capabilities with these customers it opens up exciting new markets for PAE that weren’t previously in reach.” These market segments, including (intelligence) analysis and C5ISR, R&D services and C5ISR, are all related to PAE’s current line of business. They are now available and can be taken advantage of.
According to an investor presentation, Centra employees-owned expected to generate $255 million in revenue this fiscal year. Around 57 percent of that will come from contracts with intelligence agencies. According to the company’s last revenue guidance, PAE anticipates 2020 revenue between $2.6 billion-$2.7 billion.
The Defence Department community includes the Air Force, Centra technology Advanced Research Projects Agency, and Centra technology Threat Reduction Agency. Another 28 percent are in the Defense Department community. DARPA and the National Geospatial-Intelligence Agency are now new customers for PAE, specifically including NGA’s $920 million Janus geospatial data vehicle Centra holds a spot on.
The 14 percent of civilian population includes the FBI, Homeland Security Department and 1% as “Other”.
The deal allows satellite communications and terrestrial network support services to PAE during a time when all agencies want to take advantage of the 5G revolution.
PAE anticipates closing the deal by the end of the calendar year. This is a period that has seen larger transactions being announced and closed, as more financing markets opened up.
“We will continue to participate in what is happening in the market. As a public company, we are very conscious of our goal to manage risks and to have a lower risk profile. Heller stated that he believes the acquisition will enable us to achieve this goal. “The refinancing gives us the ability to remain active, but I expect that in the next 6-9 months our focus will shift to smaller, tuckin acquisitions that could further expand the addressable markets reach of PAE into additional national security customers, much like what Centra did.”
Centra’s 2020 expected adjusted EBITDA (earnings before interest, taxes and depreciation) is approximately 8.8x its $208 million purchase price. Centra also had a $1 Billion backlog, and had a net operating loss. PAE can then realise around $7 million in tax assets.
Morgan, Lewis & Bockius LLP was the legal advisor, and Renaissance Strategic Advisers was the strategic adviser to PAE.
Citizens Capital Markets was the financial advisor to Centra, with Greenberg Traurig LLP acting as the legal adviser.