November 30, 2018 12:11 AM
The two celebrities shilled initial coin offerings without disclosing they were paid to promote them.
What do boxer Floyd Mayweather and record producer DJ Khaled have in common? Getting on the SEC’s bad side, apparently.
The US Securities and Exchange Commission (SEC) recently charged the two men with “failing to disclose payments they received for promoting ICOs.” The SEC claimed these are the “first cases to charge touting violations involving ICOs.” Mayweather shilled three ICOs over social media but did not disclose his compensation from the ICO issuers, one being Centra Tech Inc. (Centra), which paid him $100,000. Mayweather received $200,000 to promote two other unnamed ICOs.
As for Khaled, he was paid $50,000 from Centra – he called the company’s ICO a “[g]ame changer” on his social media accounts.
Centra is not a random crypto business, either. In April, the company’s founders were charged by the SEC for “orchestrating a fraudulent initial coin offering” in 2017. Parallel criminal charges were filed by the US Attorney’s Office for the Southern District of New York as well.
Without admitting or denying charges, both Mayweather and Khaled agreed to pay the SEC’s fines, which include disgorgement, interest, and penalties. The two also said they would not promote any securities – cryptocurrency-related or otherwise – for a fixed period (three years for Mayweather and two years for Khaled). Mayweather also agreed to continue to cooperate with the investigation.
The SEC is using the celebrities’ illegal actions as an example. “These cases highlight the importance of full disclosure to investors,” said Stephanie Avakian, co-director of the agency’s Enforcement Division. “With no disclosure about the payments, Mayweather and Khaled’s ICO promotions may have appeared to be unbiased, rather than paid endorsements.”
Co-director Steven Peikin of the Enforcement Division added that securities touted by social media influencers, blockchain-based or not, could be fraudulent.
The SEC’s investigation is ongoing.
Daniel Putney is a full-time writer for ETHNews. He received his bachelor’s degree in English writing from the University of Nevada, Reno, where he also studied journalism and queer theory. In his free time, he writes poetry, plays the piano, and fangirls over fictional characters. He lives with his partner, three dogs, and two cats in the middle of nowhere, Nevada.
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